Will Innovation Breed Success?

September 6, 2012 Posted by The Law Firm for Non-Profits, P.C. in Accountability, Fundraising, News

Many donors only give to charities that demonstrate specific evidence of their success. The governor of Massachusetts is now turning this commonly held standard into new state legislation. It’s called Social Innovation Financing.

MA’s Governor Deval Patrick and Lt. Governor Timothy Murray released a statement explaining that it’s a “simple premise – have government pay for demonstrated success rather than the promise of success.” Basically, the government will only fund a nonprofit if it can show evidence of its effectiveness. And the government will make this happen by entering into “pay-for-success” contracts with nonprofits, which will only require the government to pay service providers after they have demonstrated their success.

The Patrick administration also foresees the possibility of using these contracts in conjunction with social impact bonds. Through these bonds, third party investors will give nonprofits upfront funding, which in turn will enable nonprofits to enter into pay-for-success contracts with the government.

Governor Patrick plans on using this method to initially tackle two big social issues – chronic homelessness and juvenile justice. If this innovative approach is a success, then it may become a blueprint for programs across the county in large metropolitan areas. We will keep you posted.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

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