Financial Modelling Workshop

The Office of Social Impact Investment

August 2017
Workshop agenda

• Recap on the basics

• Purpose and use of the financial model template (the

Model)

• Identifying and inputting data

• Analysing outputs
What is social impact investment?
Social impact investment seeks to generate social impact
alongside financial return.

Investors
provide upfront
funding for
services

Government
savings are used Services
to repay
investors and providers
pay them a deliver agreed
return on social outcomes
investment

Outcomes
improve and
people need less
support.
Features of social impact investment
Workshop agenda

• Recap on the basics

• Purpose and use of the financial model template

• Identifying and inputting data

• Analysing outputs
Purpose and use of the Model

• Use of the Model is optional

• We have issued Model v1 – feedback is welcome

• Purpose of the Model: to help proponents assess the

feasibility of a social investment proposal

• Purpose of the workshop: provide guidance on how to

identify and input data, and analyse results
 Workshop structure
• The workshop has been aligned to the RFP questions

Target Proposed
Intended
Financial Value
outcomes &
cohort services
measures
assessment proposition
Workshop agenda

• Recap on the basics

• Purpose and use of the financial model template

• Identifying and inputting data

• Analysing outputs
First we need to understand the model

?
Don’t forget to read the instructions
Model contents
 The Contents will help you understand the Model structure
and where you need to go

If you get lost, go back to the Contents

Go to Contents Page
Located in the top left hand corner
 Case study
A worked example of identifying relevant
information and inputting it into the
model
Case study

Breaking the Cycle (BTC)

BTC is a not-for-profit organisation that aims to reintegrate
offenders into the community, thereby reducing reoffending
and ensuring community safety.
 BTC – Target cohort
Relevant RFP questions:
Target • How will the client group be identified and defined?
Cohort • How many people will be in the intervention group?
• How will the group be referred (consider timing of referrals)?

• BTC works with men aged 18-24, living in Blacktown, that are serving a supervised
parole order, and that are of medium-high and high risk of reoffending (as assessed by
Corrective Services).
• BTC aims to assist 100 people in the first year, and 200 people per year thereafter.

Client Referral Pathway

• BTC receive referrals from Corrective services. The BTC program commences every six
months.
Client Uptake
• BTC expects that 70% of clients offered the service will complete the program.
 BTC – Target cohort
Relevant RFP questions:
Target • How will the client group be identified and defined?
Cohort • How many people will be in the intervention group?
• How will the group be referred (consider timing of referrals)?

• BTC works with men aged 18-24, living in Blacktown, that are serving a supervised
parole order, and that are of medium-high and high risk of reoffending (as assessed by
Corrective Services).
• BTC aims to assist 100 people in the first year, and 200 people per year thereafter.

Client Referral Pathway

• BTC receive referrals from Corrective services. The BTC program commences every six
months.
Client Uptake
• BTC expects that 70% of clients offered the service will complete the program.
 BTC - Cohort data input

Inputs_1 Worksheet Inputs_2 Worksheet – Time Variable Assumptions

 BTC – Proposed service
Proposed Relevant RFP questions:
• What is the proposed intervention to be delivered?
service

• BTC has designed a wrap-around program that will support parolees reintegrate into
the community, including: counselling, alcohol and drug treatment, access to housing
and other support services and referrals as necessary
• Each client will be assigned a case worker who will support them over a period of
12 months.
• BTC’s proposed social investment funded service is set to start on 1 July 2018 and go
to 31 December 2024.
 BTC – Proposed service
Proposed Relevant RFP questions:
• What is the proposed intervention to be delivered?
service

• BTC has designed a wrap-around program that will support parolees reintegrate into
the community, including: counselling, alcohol and drug treatment, access to housing
and other support services and referrals as necessary
• Each client will be assigned a case worker who will support them over a period of
12 months.
• BTC’s proposed social investment funded service is set to start on 1 July 2018 and go
to 31 December 2024.
BTC Proposed service data input

Inputs_1 Worksheet

Remember, take note of the units!

 BTC outcomes measurement
Outcomes Relevant RFP questions:
• What are the metrics to trigger outcomes payments?
measures • What will you compare against to determine success?
• What are the economic benefits to Government?
• What are the broader / indirect benefits?

Outcome 1 - Reduced offending

• Over the previous four years, approximately 50% of parolees returned to custody
within 12 months of their release to supervised parole
• BTC seeks to reduce the rate of return to custody to 40% for its cohort
• By preventing parolees return to custody, BTC has calculated saving to Corrective
Services of $5,000 per outcome. BTC also notes the broader savings to local
government (e.g. vandalism) and the community. BTC values these benefits at $2,000
per outcome.
 BTC outcomes measurement
Outcomes Relevant RFP questions:
• What are the metrics to trigger outcomes payments?
measures • What will you compare against to determine success?
• What are the economic benefits to Government?
• What are the broader / indirect benefits?

Outcome 1 - Reduced offending

• Over the previous four years, approximately 50% of parolees returned to custody
within 12 months of their release to supervised parole
• BTC seeks to reduce the rate of return to custody to 40% for its cohort
• By preventing parolees return to custody, BTC has calculated saving to Corrective
Services of $5,000 per outcome. BTC also notes the broader savings to local
government (e.g. vandalism) and the community. BTC values these benefits at $2,000
per outcome.
BTC outcomes data input

Inputs_1 Worksheet

Remember, take note of the units!

 BTC outcomes measurement
Outcomes Relevant RFP questions:
• What are the metrics to trigger outcomes payments?
measures • What will you compare against to determine success?
• What are the economic benefits to Government?
• What are the broader / indirect benefits?

Outcome 2 - Reduced utilisation of hospital bed days

 In the previous year, an average of 5 bed days were utilised by parolees within 12
months of their release to supervised parole
 BTC seeks to reduce the use of hospital beds days for its cohort to 3 bed day per
person
 By reducing parolees use of hospital, BTC has calculated saving to Department of
Health of $1,000 per bed night. BTC also notes the broader savings to the community
(such as costs to family members). BTC values these benefits at $200 per bed night.
 BTC outcomes measurement
Outcomes Relevant RFP questions:
• What are the metrics to trigger outcomes payments?
measures • What will you compare against to determine success?
• What are the economic benefits to Government?
• What are the broader / indirect benefits?

Outcome 2 - Reduced utilisation of hospital bed days

 In the previous year, an average of 5 bed days were utilised by parolees within 12
months of their release to supervised parole
 BTC seeks to reduce the use of hospital beds days for its cohort to 3 bed day per
person
 By reducing parolees use of hospital, BTC has calculated saving to Department of
Health of $1,000 per bed night. BTC also notes the broader savings to the community
(such as costs to family members). BTC values these benefits at $200 per bed night.
BTC outcomes data input

Inputs_1 Worksheet

Remember, take note of the units!

BTC costs of service delivery
Costs
 BTC’s program will initially require 2 staff members at an annual cost of $200k.
However, this will double as the program runs into its second year of operation.
 BTC expects to be able to utilise existing premises, and charge a proportion of rent,
calculated at $20k p.a. to the project
 BTC has a small budget to enable them to purchase ad hoc items to support their
clients (e.g. training costs). BTC has set aside $8k p.a. for these costs.
 BTC estimates that the initial set up cost for the program will be $250,000, and
evaluation of the program will cost $50,000 p.a.
BTC costs of service delivery
Costs
 BTC’s program will initially require 2 staff members at an annual cost of $200k.
However, this will double as the program runs into its second year of operation.
 BTC expects to be able to utilise existing premises, and charge a proportion of rent,
calculated at $20k p.a. to the project
 BTC has a small budget to enable them to purchase ad hoc items to support their
clients (e.g. training costs). BTC has set aside $8k p.a. for these costs.
 BTC estimates that the initial set up cost for the program will be $250,000, and
evaluation of the program will cost $50,000 p.a.
BTC costs data input
BTC revenue
Revenue
• BTC has not engaged in an outcomes based contract before. BTC is proposing
for 30% of operating costs to be paid for by Government on a fee-for-service
basis.
• BTC runs a small op-shop that some of their clients volunteer in. The op-shop
generates $20k p.a.
• BTC has a strong relationship with a Foundation that has offered $30k p.a.
BTC revenue
Revenue
• BTC has not engaged in an outcomes based contract before. BTC is proposing
for 30% of operating costs to be paid for by Government on a fee-for-service
basis.
• BTC runs a small op-shop that some of their clients volunteer in. The op-shop
generates $20k p.a.
• BTC has a strong relationship with a Foundation that has offered $30k p.a.
BTC revenue data input

Inputs_1 Worksheet

Inputs_2 Worksheet – Time Variable Assumptions

Workshop agenda

• Recap on the basics

• Purpose and use of the financial model template

• Identifying and inputting data

• Analysing outputs
Determining the investment requirement

Inputs_1 Worksheet

Allow
for a
buffer
Dashboard data – base case
Conducting scenario analysis

• Once you are comfortable with your Base Case, you can
test some different scenarios.
• A low case scenario should demonstrate lower than
expected performance or conservative estimates.
• A high case scenario should demonstrate higher than
expected performance or ambitious estimates.
• To develop scenarios, repeat the steps to develop the Base
Case and enter assumptions on both Inputs_1 and Inputs_2
worksheets.
Entering scenario data
• Scenario data is entered in Columns I and J on the Inputs_1 sheet
• The Scenario can be changed at cell C11 of the Inputs_1 sheet
Entering scenario data
• Scenario data is also entered on the Inputs_2 sheet
Inputs_2 Worksheet – Time Variable Assumptions
Dashboard data – Low Case
Analysing results – commentary and checks

Comments
will appear
where
there are
areas for
attention
Dashboard data – high case
Analysing results – commentary and checks

Comments will appear

where there are areas for
attention
Closing comments

• Reminder: use of the Model is Optional

• Assumptions included in the Model can be preliminary and

will be refined in the Joint Development Phase

• Assumptions can be based on: track record, public info,

research, other – please include in Reference List sheet

• Feedback is welcome – OSII will issue updates to the Model

 www.osii.nsw.gov.au
socialimpactinvestment@dpc.nsw.gov.au
@NSWOSII