1. family and parenting
2. children

Response to Request for Information
Social Impact Bonds
for the State of Illinois, Governor’s Office of Management and Budget
A Social Impact Bond for Dually Involved Youth
submitted by
Children’s Home + Aid
June 14, 2013
TABLE OF CONTENTS
PROPOSED SIB OVERVIEW
Page 3
SECTION 3.1: Background Information
Page 6
SECTION 3.2: Description of Program
Page 9
Part A: Population, Interventions, Outcomes, Benefits and Cost Savings
Page 9
Part B: Structure, Services and Supports
Page 14
Part C: Project Scale, Budget and Timeline for Implementation
Page 17
Part D: Funding Sources and Technical Support
Page 23
Part E: Evaluation of Outcomes and Calculating Savings
Page 23
SECTION 3.3: Description of Governance Structure
Page 26
Part A: Roles and Responsibilities
Page 26
Part B: Effective Structure
Page 28
Part C: Alternatives
Page 28
SECTION 3.4: Other issues and considerations
Page 29
BIBLIOGRAPHY
Page 30
ATTACHMENT: Detailed Savings Analysis
Page 32
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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PROPOSED SIB OVERVIEW
Children’s Home + Aid is pleased to submit this response to the Governor’s Office of Management
and Budget’s Request for Information on Social Impact Bonds. What follows is our high level
summary for a framework related to a specific Social Impact Bond (SIB) proposal and a case which
we believe would make this an attractive option for the State of Illinois to explore more fully
through the RFP process. We are excited by the prospect of working with the state of Illinois to
utilize the incentive structure of Pay for Performance combined with the financing structure of
Social Impact Bonds to improve outcomes for at-risk children and families at a lower cost to Illinois
taxpayers. The core components of a SIB targeting what is often referred to as “Dually Involved
Youth,” follows, and is discussed in further detail utilizing the sections outlined in the RFI.
Target Populations


600 Dually Involved Youth (DIY) between the ages of 13 and 17 who are Department of
Children and Family Services (DCFS) wards and are also involved in the Department of
Juvenile Justice (DJJ).
200 youth between the ages of 13 and 17 involved with DJJ each year who are at increased
risk of entering DCFS custody.
Current Cost Estimates



33% or 200 DIY represent high-end placements (DIY-high end) served by DCFS with an
estimated annual cost of $25 million. Over 5 years, services for this population could top
$125 million.
66% or 400 DIY represent lower-end placements (DIY-low end) served by DCFS who
represent an elevated risk of placement changes and increased delinquency resulting in a
migration into the DIY-high category. Over 5 years, services for this population could top
$60 million.
An estimated 10% of the roughly 2,000 youth exiting DJJ detention each year come to the
attention of DCFS, most of whom are at significant risk of migrating into high end care.
Over 5 years, services for this population could top $67.5 million.
Proposed Service Population



Identify and serve 50 DIY-high end placements from Cook County each year of program
operation.
Identify and serve 50 DIY-low end placements from Cook County each year of program
operation.
Identify and serve at least 200 youth from Cook County involved in the DJJ system at risk of
entering DCFS for placement or other service supports.
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Program Design and Interventions


Build a more coordinated service delivery system for DIY using Georgetown Law School
and Casey Family Programs’ Crossover Youth Practice Model as a strategy for leveraging
dual system integration, using improved assessment and care management to align services.
Use a combination of evidence-based interventions (Functional Family Therapy,
Multidimensional Treatment Foster Care for Adolescents, Multi-Systemic Therapy and
Wraparound Services) and one promising practice (Family Find) to: a) reduce the likelihood
of subsequent delinquency, b) reduce the utilization of high end care, c) deflect placement
into DCFS custody and high end care and d) and for all DIY, reduce length of time in care.
Targeted Outcomes by Population

DIY-high end and DIY-low end placements:
1. Utilize fewer days in high end placements, including detention and congregate care;
2. Experience greater placement stability while in substitute care
3. Engage in less criminal behavior, associate less with deviant peers, and experience fewer
instances of juvenile justice involvement;
4. Improved relationships with their foster families and peers; and
5. Experience greater well-being, including reduced levels of substance abuse.

Youth coming from DJJ:
1. Be less likely to enter foster care; and
2. Experience more placements with biological family members.
Intervention Costs

Based upon implementation analyses of the proposed interventions in other jurisdictions
detailed in the response to the RFI, the average cost per participant is estimated at $7,000,
which is layered on to existing service costs for DIY youth and youth at risk of entering
DCFS care. Not all interventions will be utilized for all participants, so this represents a
conservative average cost.
Program Scale, Investment and Savings




To demonstrate the potential investment opportunity, RFI outlines a scenario for serving 250
DIY in high-end care placements (congregate), 250 DIY in lower intensity placements and
1,000 youth at risk of entering DCFS custody due to DJJ involvement in Cook County over a
five year period.
Using these numbers as an illustration, the total investment level sought to fund the proposed
interventions for a five year period in Cook County is $13 million, or roughly $2.6 million
per year.
Included in this cost are annual evaluation costs, investment and financial advisory costs and
an intermediary agency fee for managing the SIB activities over the full period of the bond.
If the proposed interventions are successful in reducing costs for DIY-high end and DIY-low
end by a modest 25% and successfully deflects 50% of youth with DJJ involvement who
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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
would have normally entered DCFS custody, the expected savings over an eight year period
is an estimated $30.7 million for DCFS alone, with additional savings for DJJ and Cook
County probation which are not analyzed in the this response to the RFI.
After bond repayment, the residual available to be shared by government and investors is an
estimated $17.3 million. This estimated residual represents the power of targeting DIY as
potential model for a SIB.
SIB Design, Evaluation and ROI Estimates



As part of the response to the RFI, Children’s Home + Aid is proposing the use of a
randomized control trial as a methodology for calculating the savings of the proposed
intervention and any resulting savings. Use of a randomized control trial is an innovative
step in the SIB development process (as most are designed using benchmarks), and Illinois is
well-positioned to test this methodology having used it multiple times to evaluate the success
of a number of federal funding waivers netting Illinois more than $100 million in additional
federal funding.
Using the difference between the unit cost of the control group youth (presumed to be higher)
and the intervention group youth (presumed to be lower), it is expected the even with modest
performance improvements outlined above, savings would accrue within the second year of
program operation, and the bond could potentially be retired by the fourth year, with savings
(and the residual) continuing to grow through year 8.
Depending upon how the residual savings were divided between investors and government,
an initial investment of $13 million could result in result in an $8-17 million return at the end
of an eight year period (which allows for savings and the resulting residual payment to bond
holders to accrue post program operation). Annualized, this represents a rate of return
between 8% and 16%.
We appreciate that our response to this RFI is part of a larger exploratory process designed to
shape a number of follow-up activities to advance this effort. We appreciate the opportunity to be
part of this important first step. We hope to be a thought partner with the State in shaping a
program that takes advantage of the full potential inherent in Pay for Success arrangements
financed with Social Impact Bonds so that Illinois’ citizens in all of the GOMB’s areas of
interest are served more efficiently and effectively, especially its at risk children and families
whom we serve every day.
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SECTION 3.1: BACKGROUND INFORMATION
Organizational Overview: The scope of Children’s Home + Aid’s professional and voluntary
leadership allows us to provide the necessary adaptive leadership as an intermediary as a way to
attract investors to a public-private partnership and work creatively with government stakeholders
and community partners. Further, our leadership in service technologies allows for the necessary
technical and transactional assistance that will be needed to ensure partner accountability in a more
robust performance-management culture. As such, Children’s Home + Aid is ready to assist GOMB
to design the best possible program for our state’s most vulnerable children.
Each year, our agency protects, educates and counsels more than 40,000 children, youth and families
to overcome the overwhelming obstacles of poverty, abuse and neglect. A dedicated team of staff
and volunteers deliver more than 70 programs including foster care, adoption services, early
childhood education, family counseling, and youth services in 40 Illinois counties. For more than
130 years, Children’s Home + Aid has been a compassionate advocate helping to shape public policy
around early childhood, child welfare and juvenile justice.
Relevant Experience. Many of the goals outlined in Section 2 of the RFI are consistent with the
mission of Children’s Home + Aid, and include target populations currently being served throughout
the state. Specifically, our organization has experience with program operation and innovation in
both the education and at-risk youth categories.
Education. Children’s Home + Aid supports state and local efforts in the education domain through
a number of programs designed to support the educational success of children.
a) Evidence-based Home Visiting Programs. Throughout the state, Children’s Home +
Aid has supported at-risk families with home visiting services demonstrated to be
effective in reducing abuse and neglect and preparing young children to enter
kindergarten ready to succeed by using evidence-based program models including Early
Head Start, Healthy Families and the Doula program. Children’s Home + Aid also
serves as the coordinating agency for the state’s expansion of home visiting services
through the Affordable Care Act’s Maternal and Infant Early Childhood Home Visiting
(MIECHV) program in greater Englewood. This collaborative includes management of
200 home visiting slots utilizing evidence-based programs, and supporting a centralized
referral and intake process for three communities on Chicago’s South Side.
b) Early Childhood Education. There are probably fewer public investments with greater
long-term potential to change life trajectories than high quality early childhood
education programs. Children’s Home + Aid delivers early childhood services to more
than 1,100 children each year using a variety of program options including Early Head
Start, Head Start, Prevention Initiative and Pre-School for All. All center-based
programs are accredited through NAEYC with a three star rating from the Illinois
Quality Rating System. These programs regularly track and report continued progress
on a wide-variety of child developmental domains.
c) Community Schools. Since 2002, Children’s Home + Aid has been a leading provider
in Chicago Public Schools’ Community Schools Initiative. With a unique focus on
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communities plagued by violence, our work has combined social emotional learning
along with Out-of-School-Time academic supports and has been successful in increasing
school attendance and improving grades, math and reading scores for participants.
Innovation and evidence-based program replication in education domain. In 2010
Children’s Home + Aid was selected by the Office of Adolescent Health at the United
State Department of Health and Human Services to replicate and scale up an evidencebased model (the Carrera Adolescent Pregnancy Prevention Program developed by
Children’s Aid Society in New York) designed to increase graduations, increase college
enrollment, reduce risky sexual activity and pregnancy. The five year, $7.2 million
grant includes design, implementation and management of a rigorous evaluation which
includes an experimental design and use of randomized control trial.
At-Risk Youth. Children’s Home + Aid has a long and deep history serving at- risk youth facing a
variety of challenges to their well-being including juvenile justice, foster care and violence
prevention.
a) Juvenile Justice. Children’s Home + Aid has been a leading provider of diversionary
programs for youth through programs such as Comprehensive Community-Based Youth
Services (CCBYS) and Redeploy Illinois. In partnership with other providers in
locations including Cook County, Madison County and St. Clair County, Children’s
Home and Aid has consistently exceeded performance expectations by successfully
maintaining youth in their families, preventing further involvement in both the child
welfare and juvenile justice systems for 97% of the clients served annually. With
respect to our work with the Illinois DJJ, the Redeploy Illinois work in St. Clair County
has reduced the number of youth entering detention by 81% since the program’s
inception in 2005.
b) Foster Care. Founded as the first in a national network of Children’s Home Societies
throughout the United States to care for children without families, Children’s Home +
Aid has been a leading provider of foster care services in the state of Illinois. Children’s
Home + Aid provides the complete range of foster care services in every region of the
state, and has maintained and grown this capacity through consistent performance in
securing permanency for children in care. This includes relative foster care, traditional
foster care, specialized foster care and residential treatment, along with a number of
front-end services and post-permanency supports for children exiting care. Since the
implementation of performance-based contracting in foster care in 1998 and in
residential treatment in 2008, Children’s Home + Aid has been ranked in the top quarter
or higher in each and every market, and has been especially dominant in Cook County
where most new foster care referrals are served by Children’s Home + Aid.
c) Violence Prevention. Beginning in 2008, Children’s Home + Aid began facilitating
service coordination for violence prevention work targeting youth ages 14-21 in the
Englewood community located on Chicago’s south side by serving as a lead agency for
the Safety Net Works program funded by the Illinois Department of Human Services.
By 2010, Children’s Home + Aid had expanded this role through the Neighborhood
Recovery Initiative (then funded through the Illinois Violence Prevention Authority) and
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Building a Safer Englewood (funded through a special legislative appropriation). In our
role as lead agency, Children’s Home + Aid was responsible for managing a variety of
sub-contracts and providing training and support for the implementation and used of
Management Information Systems to track and report on service outcomes. In 2011,
with support from the Chicago Community Trust, Children’s Home + Aid used data
collected through the initiative to analyze service needs and make recommendations to
funders about programming changes which went into effect in 2013.
Innovation and evidenced-based program replication. In 2012 Children’s Home +
Aid began working with the Illinois Department of Children and Family Services to
explore using a federal Title IV-E waiver to test evidence-based approaches to reducing
the negative impact of foster care placement on infants and toddlers. The work resulting
in the IB3 (Illinois Birth to Three) Waiver, the nation’s first waiver demonstration
project testing targeted interventions on improving the permanency and well-being of
infants and toddlers entering care in Cook County. Children’s Home + Aid is the largest
provider testing the efficacy of two targeted interventions (Child-Parent Psychotherapy
and the Nurturing Parent Program) using an experimental design featuring a randomized
control trial.
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SECTION 3.2: DESCRIPTION OF PROGRAM
Children’s Home + Aid understands that GOMB may pursue several approaches for a Social Impact
Bond opportunity. As we will elaborate in Section 3.4: Other Considerations, we believe a long-term
approach that has the greatest long-term potential involves the issuance of registered securities that
enjoy the same guarantees as General Obligation Bonds. We would welcome the opportunity to
explore this potential as part of the RFP process. For now, as it would take time and considerable
effort to develop the regulatory protocols and secondary markets necessary to attract significant
capital, we propose that an unregistered SIB by privately negotiated terms to finance a project to be
administered by Children’s Home + Aid potentially serving as an intermediary entity in partnership
with other qualified service providers.
Part A: Population, Interventions, Outcomes, Benefits and Cost Savings
Problem. Children's Home + Aid is especially interested in youth who are dually involved in the
juvenile justice system and the state’s child welfare system, also known as Dually Involved Youth
(DIY). Research has consistently demonstrated that there is a considerably higher probability that
young people who have been abused or neglected are more likely to engage in delinquent behavior
(Ryan and Testa 2005). These youth, because they cross service silos in two very complex systems,
are typically inadequately supported by both systems, leading to longer lengths of stay in foster care,
placement instability leading to more expensive residential care, and poor outcomes for youth
including educational failure, substance abuse and continued, escalating involvement in the juvenile
justice and adult criminal justice system. Children’s Home + Aid would be most interested in
designing a multi-faceted program to address Illinois’ DIY population that would include Pay for
Success and SIB concepts: investing dollars up front to avoid more costly, less effective
interventions later on.
Target population. We see three basic pathways which typically account for youth becoming
dually-involved: (1) the most common involves youth who are DCFS wards who become involved
with delinquency system; (2) a youth involved in the juvenile justice system is found to be a victim
of maltreatment resulting in the opening of a child welfare case; and (3) a youth exiting a juvenile
detention facility entering the child welfare system because they do not have a placement resource to
which they can be returned (Cusick, Goerge and Bell 2009).
For the purpose of this RFI, we are defining the target population in the following manner:
1) DIY: Youth ages 13-17 who are currently involved in both the child welfare system and the
juvenile justice system; and
2) DJJ involved youth at-risk of entering DCFS: Youth ages 13-17 who are initially involved in
the juvenile justice system and are subsequently at risk of becoming involved in the child
welfare system due to allegations of abuse and/or neglect in the home or the absence of a
placement resource for a youth exiting detention
A recent report from Chapin Hall at the University of Chicago estimates that ten percent of all youth
who leave the juvenile justice system in Illinois enter the foster care system after their release
(Cusick, Goerge and Bell 2009). An analysis of DCFS data completed in May of 2013 estimated
there were approximately 600 youth ages 13-17 with a documented history of detention placements.
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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Of the estimated 600 wards with dual involvement, DCFS has identified an estimated 200 wards
who are placed in higher end settings with an estimated cost to serve as high as $25 million annually.
Research tells us that most of these youth experience longer stays in foster care, are more likely to
experience multiple placements, are more likely to experience placements in high-end residential
placements and are disproportionately African Americans (Ryan and Testa 2005); (Herz and Ryan
2010). The research also tells us that this population struggles academically and has a greater
likelihood of engaging in high-risk behaviors, including drug and alcohol use (Halemba, et al. 2004).
In turn, this colors the perception of juvenile justice decision makers, making this population subject
to harsher dispositions then parts of juvenile justice system which are not dually involved (Ryan, et
al. 2007); (Morris and Freundlich 2004); (Ross and Conger 2009).
While additional research is needed to clearly segment this population by geography and service
need, existing research suggests that combining a more coordinated service strategy – including
assessment, case planning, case management, and appropriate service interventions – could
dramatically reduce the service costs through use of community approaches for youth (American Bar
Association 2008); (Herz and Ryan 2010); (Nash and Bilchik 2009)
Interventions. The theory of change at the foundation of our proposal for a SIB is that youth ages
13-17 who are involved in both the child welfare system and juvenile justice system will experience
greater placement stability, greater permanency and fewer instances of subsequent delinquent
behavior if there is greater coordination and delivery of targeted evidence-based and promising
interventions including Multidimensional Treatment Foster Care for Adolescents, Functional
Family Therapy, community-based wraparound services, and Family Find. Furthermore, many of
these interventions, while delivering superior placement and delinquency outcomes, may also
provide significant cost savings to the State of Illinois, to participants, and to society at large. While
the relevance, success, and potential cost savings of each of these interventions is detailed below,
further refinement of data about the target population, geography and service capacity within
specific communities should shape a finalized service strategy that aligns interventions with
demonstrated needs.

Multidimensional Treatment Foster Care – Adolescents (MTFC-A). MTFC-A is a
model of foster care treatment for youth 12-18 years old with severe emotional and
behavioral disorders and/or severe delinquency. MTFC-A creates opportunities for youths to
successfully live in families rather than in group or institutional settings and is a particularly
relevant model for diversion due to its emphasis on daily structure, supervision, wellspecified consequences, and helping youth to avoid deviant peer associations ( (California
Evidence-Based Clearning House for Child Welfare 2013).
Improved Outcomes: MTFC-A is backed by a multitude of high-quality evidence, including
research on its application to the juvenile delinquent population. For example, a random
control study in Oregon found that providing MTFC-A to chronic juvenile offenders
produced fewer criminal referrals, fewer violent or serious crimes, fewer delinquent acts, and
more time in their placement families (Chamberlain and Reid 1998)). In a two-year followup, only 5% of the MTFC-A treatment group were found to have two or more criminal
referrals for violent offenses – compared to 24% in the control group (Eddy, Whaley and
Chamberlain 2004). In other random control studies, MTFC-A was also associated with
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superior foster care outcomes including more days in the community, fewer days in
institutional settings, and fewer behavioral problems (Chamberlain and Reid 1998).
Cost Savings: The reduced delinquency and improved placement outcomes associated with
MTFC-A can lead to significant cost savings for Illinois. The non-partisan Washington State
Institute for Public Policy estimated that investing $7,730 (in 2010 dollars) in the additional
cost of providing MTFC-A would save the state $8,843 per participant and provide $31,944
in benefits to the participant and society, allowing for $33,047 in total net societal benefits
and a return on investment of 142% (Washington State Institute for Public Policy July 2011
Update)

Functional Family Therapy (FFT). FFT is a family intervention program for dysfunctional
youth in which weekly family therapy sessions work to enhance relations with family and
peers, build conflict resolutions skills, and improve youth temperament. Developed to
address conditions prevalent among DIY such as conduct disorder, violent acting-out, and
substance abuse, FFT has been applied to a wide range of problem youth and their families in
various multi-ethnic, multicultural contexts (California Evidence-Based Clearning House for
Child Welfare 2013).
Improved Outcomes: Rigorous random-control trials have found FFT to be associated with
positive outcomes for a juvenile delinquent population. For example, a random-control trial
of 86 delinquent teenagers and their families found that participants receiving FFT had a
26% recidivism rate 18 months after treatment – about half the 50% recidivism rate of the
control group (Alexander and Parsons 1973). Other random control trials have found FFT to
lead to beneficial placement outcomes including reductions in drug use (Waldron, et al.
2001), significant reductions in alcohol abuse (Slesnick and Prestopnik 2009), and improved
family communication (Alexander and Parsons 1973).
Cost Savings: The reduced recidivism and substance abuse associated with FFT could
produce significant cost savings for the state of Illinois. The non-partisan Washington State
Institute for Public Policy estimated that investing $3,198 (in 2010 dollars) in the additional
cost of providing FFT would save the state $13,719 per participant and provide $46,820 in
benefits to the participant and society, allowing for $57, 341 in net total benefits per
participant (Washington State Institute for Public Policy July 2011 Update)

Multisystemic Therapy (MST). MST is an intensive family and community-based treatment
for serious juvenile offenders with possible substance abuse issues and their families. MST is
a particularly appropriate intervention for the DIY population because it aims to decrease
youth criminal behavior and out-of-home placements by promoting behavior change and
addressing a comprehensive range of risk factors across family, peer, school, and community
contexts (California Evidence-Based Clearning House for Child Welfare 2013).
Improved Outcomes: Multiple random-control trials among the juvenile delinquent
population have found MST to reduce criminal behavior, enhance family functioning, and
improve peer relations. For example, a South Carolina random-control trial found that
juvenile delinquents receiving MST showed improved family cohesion, a 43% decrease in
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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recidivism, and a 64% decrease in incarceration (Henggeler, Melton and Smith 1992). A
four-year random control study in Missouri found that 26% of serious juvenile defenders had
been rearrested 4 years after receiving MST, significantly lower than the 71.4% of controlgroup youth who had been rearrested within four years (Bourdin, et al. 1995).
Cost Savings: The significant reductions in crime and recidivism associated with MST could
equate with significant societal benefits. The non-partisan Washington State Institute for
Public Policy estimated that investing an estimated $7,076 (in 2010 dollars) to provide FFT
would produce total benefits to the participant, state, and society of $29, 302 per participant,
allowing for $22,096 in net total benefits per participant and a return on investment of 28%
(Washington State Institute for Public Policy July 2011 Update).

Wraparound Services. Wraparound is designed to meet the complex needs of children who
are involved with several child and family-serving systems (e.g., mental health, child
welfare, juvenile justice, special education, etc.), who are at risk of placement in institutional
settings, and who experience emotional, behavioral, or mental health difficulties. The
Wraparound process requires that families, providers, and key members of the family’s social
support network collaborate to build a creative plan that responds to the particular needs of
the child and family.
Improved Outcomes: The California Evidence-based Clearinghouse for Child Welfare says
that Wraparound has “promising research evidence” (California Evidence-Based Clearning
House for Child Welfare 2013) and multiple research studies suggest Wraparound may lead
to improved placement and delinquency outcomes. For example, one study randomly
assigned 132 at-risk foster care children to Wraparound or standard practice and found
Wraparound participants had fewer placement changes, fewer total run-away days, and more
permanent placements (Clark, et al. 1996). A random-control study of youth diverted from
residential treatment centers found that participants receiving Wraparound services reported
better adjustment back into the community than control group participants assigned to
standard practice (Hyde, Burchard and Woodworth 1996). A comparison-group analysis of
juvenile offenders with mental health needs also found that youth receiving Wraparound
services had lower recidivism than youth receiving standard services (Pullman, et al. 2006).
Cost-Savings: Although a rigorous cost-benefit analysis of a Wraparound services model has
yet to be performed, there are promising reports of cost-effectiveness. For example, the
National Conference of State Legislatures, in its Cost-Benefit Analysis of Juvenile Justice
Programs, reported that a Milwaukee-based Wraparound model served 650 youth at an
annual cost of $39,600 per participant – nearly $20,000 less than the cost of housing a
juvenile offender in a Wisconsin corrections facility (National Conference of State
Legislatures 2004).

Family Find. While not yet rated as an evidence-based model, Family Find is currently
being evaluated as promising practice to intensively identify and engage family members as
placement resources for children in foster care. Using a grant from the Social Innovation
Fund, Children’s Home Society of North Carolina is experimenting with this promising
practice, as is the state of Illinois using a federal grant. Both are being evaluated using a
random assignment study conducted by researchers at Child Trends (North Carolina) and
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Loyola University in Chicago (Illinois). We envision using this model to find and engage
family members of youth entering Illinois’ child welfare system from the juvenile justice
system. Children’s Home + Aid proposes to work with current practitioners of this service
model to test its efficacy for the proposed target population in reducing length of time in care
and increasing permanency by identifying family members who, with added supports, can be
placement options for youth who would otherwise remain in care, most often in high end
congregate care facilities.
Outcomes. By using a coordinated service approach that combines interventions shown to be
effective at both (1) achieving superior outcomes for foster youth and juvenile delinquents and (2)
producing cost savings for the state and significant benefits for society, we propose an approach
uniquely designed to meet the needs of dually involved youth in Illinois.
The following outcomes are sought for the proposed target populations:
DIY will:
 Utilize fewer days in high end placements, including detention and congregate care;
 Experience greater placement stability while in substitute care
 Engage in less criminal behavior, associate less with deviant peers, and experience fewer
instances of juvenile justice involvement;
 Improved relationships with their foster families and peers
 Experience greater well-being, including reduced levels of substance abuse
Youth involved in the juvenile justice system and are at risk of entering the child welfare system will:


Be less likely to enter foster care;
Experience more placements with biological family members
Benefits. In securing these outcomes, the impact of better coordination and utilization of proven
service interventions for the target population are expected provide the following benefits for
participants, government entities and the state of Illinois:






Increased family stability and permanency;
Reduced likelihood of detention spells for;
Improved communication and coordination between the Illinois Department of Juvenile
Justice (DJJ) and the Illinois Department of Children and Family Services (DCFS) on dually
involved youth;
Reduced expenditures for county juvenile probation system;
Reduced detention expenditures on DIY at DJJ;
Reduced out of home care expenditures on DIY at the DCFS.
Cost Savings. Research and data from other states with experience implementing the proposed
interventions clearly documents savings and a return on investment. Applying this same analysis for
Illinois will require data still needed from DCFS. This data includes a clearer analysis of the
placement settings of all currently placed DIY, movement within placement settings, the cost of
those placement settings, and the expected duration of these placement settings. Additionally, better
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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data about the number of youth entering DCFS custody after juvenile justice involvement is needed,
as well as their placement settings and duration of care.
Even without this data, however, there is reason to believe that relatively modest improvements in
the right outcomes could generate sizeable savings as demonstrated in the model which follows.
Moreover, there is potential to realize net savings within two years of operating the proposed
interventions. Taken together, these dynamics make a SIB targeting DIY an attractive opportunity.
Key assumptions around estimating costs absent proposed interventions:


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



DCFS analysis of the most expensive DIY placements (DIY-high) estimated a total cost of
$25 million annually for an estimated 200 youth in DCFS custody (Child Welfare Advisory
Committee Meeting, March 2013), resulting in annual costs of $125,000 per day and $343
per day, on average.
Based upon research and given that 33% of the DIY population represent high end
placements, the remaining 400 DIY placements (DIY-low) are at increased risk of further
delinquency and placement changes proving more costly over time (Testa and Ryan, 2005).
Nearly 2,000 youth exit the juvenile justice system in Illinois each year, of which 10% or 200
will enter the child welfare system (Cusick, Goerge and Bell, 2009). The percentage of
children from Cook County is estimated to be about 20-25% of the statewide co-hort.
Cook County currently serves half of the DIY-high population and 33% of the DIY-low
population.
On average, this suggests the annual cost per youth is approximately $125,000, with a per
diem cost of $343, suggesting most of this youth are in restrictive, high-end placements.
Given the likelihood that many DIY are at an increased risk of congregate care placements,
this cost seems consistent with what the research suggests is typical of this population – high
levels of instability requiring progressively more restrictive placements.
On the intervention side, a fully supported foster care model which also incorporates—as
needed—Family Find, MTFC-A, FFT, MST and wrap services would average between $90
and $150 per day.
If just 100 of the estimated 200 DIY representing this high cost cohort were served at an
average cost of $120 per day, the estimated savings could be as much as $8.1 million
annually, on the DCFS side alone. Additional savings could also be accrued for DJJ and
county probation offices as well.
While additional data will be helpful in finalizing and structuring a SIB model that provides a more
precise estimate of the potential return to investors, the data which is available suggests that the
existing system is based upon a cost structure which is high enough to make some level of savings
likely if there is an increase in up-front investment in evidence-based interventions designed to
produce the stated outcomes of our proposed DIY pilot project.
Part B: Structure, Services and Supports
Structure. The child welfare and juvenile justice system both seek to meet the needs of the youth
that they serve; however, each system has a very different perspective on youth and their challenges
they must manage. In the juvenile justice system, the young person is regarded as the perpetrator in
need of services to remediate delinquent behavior. In the child welfare system, this same young
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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person is seen as the victim, in need of services to mitigate the effects of abuse and neglect. More
often than not, these different perspectives result in service strategies that miss the mark for DIY in
that they create tensions and inconsistencies across systems in terms of family engagement, service
planning and service delivery.
In their comprehensive discussion of the Crossover Youth Practice Model, the Center for Juvenile
Justice Reform at Georgetown Law School and Casey Family Programs outline a conceptual
framework for rethinking services for DIY which emphasizes greater service coordination,
aggressive family and caregiver engagement and the application of evidence-based services designed
to meet the needs of the identified target population. Children’s Home + Aid sees a meaningful
opportunity to tackle the high cost and frequent failure of existing efforts to serve these dually
involved youth and we would strongly consider working with GOMB under a Pay for Success/ SIB
program to improve their efficiency and effectiveness.
Services and Supports. According to the Crossover Youth Practice Model, “Implementing a
practice model for serving crossover youth [DIY] that contains standards, evidence-based
practices…[and] procedures…can impact how the two systems serve crossover youth [DIY], and
rapidly impact outcomes for this population,” (Center for Juvenile Justice Reform and Casey Family
Programs, 2010). Our proposed service strategy would include assessment, service planning and
case management designed specifically to breach the silos of two very complex service systems. As
a provider with service experience in both systems, we would utilize the Crossover Youth Practice
Model so to support DCFS youth in reducing delinquent behaviors while providing more
community-based approaches for deep-end youth in the juvenile justice system.
A high-level summary of the proposed target population, interventions, conditions treated, expected
outcomes, and estimated cost benefits is included in the table on the following page.
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Simplified Summary of Interventions, Outcomes, and Cost Savings
Population
Proposed
Interventions
Conditions
Treated
Youth exiting juvenile
justice are placed in
costly, institutional
foster care settings
Multidimensional
Treatment Foster
Care - Adolescents
(MTDC-A)
Costly juvenile
detention or
incarceration for DIY
youth
Youth in juvenile
justice system
experience high levels
of recidivism
DIY have high levels
of substance abuse
Functional Family
Therapy (FFT)
Youth aged 13-17
dually involved in
both child welfare
system and
juvenile justice
system
and
Youth aged 13-17
involved in
juvenile justice at
risk of child
welfare
involvement
High recidivism
DIY have poor family
relations
Multisystemic
Therapy (MST)
Wraparound
Services
Youth spend fewer days
in institutional settings
Fewer criminal acts,
fewer violent or serious
crimes
Lower recidivism
Reduced drug use
Reduced alcohol abuse
Estimated total net
benefits of $57,341 per
participant per year
Improved family
communication
DIY have poor family
and peer relations
Improved family
cohesion
Youth exiting juvenile
justice are placed in
costly, institutional
foster care settings
Diversion from
institutional placement
to community settings
Some youth exiting
juvenile justice enter
child welfare system
solely due to lack of
available family when
exiting juvenile justice
Estimated total net
benefits of $33,047 per
participant per year
Lower recidivism
Lower recidivism
DIY experience
multiple placements
Potential CostBenefits
Youth live with families
rather than institutions
High recidivism
DIY frequently run
away from foster care
placements
Family Find
Improved
Outcomes
Greater permanency in
placement
Fewer days on run
Estimated total net
benefits of $22,096 per
participant per year
Wraparound service
model in Milwaukee, WI
estimated to save
$20,000 per juvenile
offender per year
Lower recidivism
Diversion away from
child welfare system
toward return to
community and
biological family
Identified as a promising
practice undergoing
rigorous evaluation.
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Part C: Project Scale, Budget and Timeline for Implementation
Project Scale. Because SIBs are designed to produce savings which can be shared between the state
and private investors, maximizing efficiencies in terms of service design and execution are critical.
Accordingly, Children’s Home + Aid encourages GOMB to consider a program funded by a SIB to
operate in communities where existing service capacity exists and where there is sufficient demand
for services to ensure basic economies of scale and descent penetration into the target population of
DIY.
Key considerations should guide decisions related to scale:


The program should be operated where there are sufficient mental health professionals, child
welfare case managers and youth service workers familiar with the juvenile justice system
through programs like Redeploy Illinois and CCBYS.
And the pilot program should be operated where there are enough foster care programs to
recruit and train caregivers in the MTFC-A, FFT and MST models.
As such, we suggest that GOMB consider designing a SIB-funded program to serve 300 youth
annually in Cook County in the following breakdown:
Cook County Population Type
DIY High-end
DIY Low-end
DJJ involved at risk of CW
Eligible to be Served
400
200
450
Actual Served Annually
50
50
200
Note: A portion of children not served would be in the “control group” for the Randomized Control Trial as
part of the proposed evaluation plan.
The five interventions that Children’s Home + Aid has proposed for this population (as shown
previously in this proposal) would be delivered in a comprehensive and integrated framework with
multiple provider partners to enhance efficiencies and economies of scale. Nevertheless, we
emphasize that services will be individualized by family and child. As such, the types and scope of
degree of such services will be different per beneficiary.
For example, a DJJ-involved youth at risk of coming into child welfare could benefit from MTDC-A
for a short term placement, but not need Family Find. On the other hand, a DIY youth in DCFS
custody may benefit from Family Find and wraparound supports but not need FFT. However, for
purposes and scale and program development, all five interventions will be developed and made
available. Further, we will estimate individual costs for each beneficiary with the intent of creating a
“blended” cost rate per beneficiary.
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Financial Architecture. Children’s Home + Aid has carefully developed a potential timeline for
the SIB with definitive cost assumptions for the purposes of serving the aforementioned targeted
populations in Cook County.
Children’s Home + Aid has proposed a variety of service interventions that can be utilized to support
the targeted population. As demonstrated by the Crossover Youth Practice Model, the service
intervention in this SIB is more of framework for building a new eco-system to support cross-over
youth. This SIB is not solely developed to implement a particular practice or the latest innovation;
rather, the SIB will build a combination of various practices within a partnership network that
supports relentless implementation, shared accountability by a number of stakeholders, and
substantial data transparency. We see this as an essential step for future scalability and longer term
success across both systems of care.
Further, Children’s Home + Aid suggests that the state not view the SIB process as a market-based
solution that seeks to deliver a particular service or product to those who typically do not have
access to such. The power of a SIB, and this particular proposal, is to effect behavioral change of
beneficiaries through the development of a new system with a complex array of partners, funders,
providers, advocates, and government leaders. The ability to access the capital markets over a
longer period to effectuate this theory of change makes the SIB process that much more impactful
Following are key components of the proposed architecture for this SIB:
Timeframe. In developing a potential model for a SIB serving DIY, Children’s Home + Aid
proposes an eight-year $13 million SIB with investor proceeds being utilized in the first five years
for working support for the proposed service interventions. (See attachment – DIY Social Impact
Bond Residual Analysis Using Cost and Effectiveness Assumptions).
After five years, the program interventions would cease with ongoing savings to be accumulated on
the back-end of the timeframe. Although the costs of the program interventions will cease after five
years, costs for the intermediary, evaluation, and independent auditor would continue through Year 8
and be paid for with accumulated savings. In the first five years, the costs of the intermediary,
evaluation, and independent auditor would be covered by the investor proceeds.
Although working capital must be funded by the bond proceeds in Year 1, any principal payment for
investors would not begin until sometime in Year 2. As such, we’d proposed that investors commit
to providing proceeds in equal amounts in the first five years to ensure that the program has adequate
capital to fund the service array. Such a staggering of the process allows for better cash flow while
creating opportunities for investors to be engaged in the process over the life of the SIB.
Children’s Home + Aid looks sees Year 1 as a “start-up” period to allow the building, training, and
staffing of the ecosystem of service arrays to mature. The evaluation team would be embedded at
commencement at this time along with the independent auditor. As such, their costs are embedded
in Year 1. The components of the governance structure, including finalization of roles and
responsibilities of stakeholders, detailed interagency agreements, and readiness activities for
program would be finalized before commencement of the bond.
Children’s Home + Aid estimates to begin yielding savings in Year 2 to be applied for principal
repayment. Principal payments would increase in Year 3 and Year 4 as savings begin to accumulate.
Beginning in Year 3, Children’s Home + Aid proposes that the SIB begin to pay out savings as “Pay
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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for Success” payments for the State, investors, and service providers partnered with Children’s
Home + Aid as the proposed intermediary entity.
Cost Assumptions. Children’s Home + Aid has developed cost assumptions that have been
incorporated into the attached analysis on the proposed SIB architecture.
Based upon available research, we have carefully extrapolated information from various sources to
create assumptions on costs, counterfactuals, and impact; however, we emphasize that any final SIB
process should aggressively test these assumptions prior to moving forward. That said, a basic look
at the dynamics involved in the target population suggest superior services could be provided at a
lower cost to tax payers.
Following is an analysis on the current cost and counterfactual assumptions and along with sources
of information that were referenced earlier:
Cost Assumptions
of Tax-Payer
Funded Services
in the DCFS
DIY –
High
DIY –
Low
DJJ-involved
cohort at risk of
DCFS
Involvement
Source
DCFS notes that $25MM is incurred
annually on 200 DIY- High End
youth annually (or $343 per diem).
Current Per Diem
$ 343
$ 165
$200
Counterfactual of
Entry
N/A
N/A
10%
Length of Stay
36 mos.
36 mos.
36 mos.
Other DIY- Low End youth are
estimated at $165 due to costs of case
management and various services
around congregate care and Teen
Living Programs.
For purposes of the analysis, we
assume the average per diem of all
DIY for the DJJ exits who entire the
Child Welfare System.
2009 Chapin Hall report notes that
10% of DJJ exits enter CW
Older youth in DCFS custody
typically have much longer Lengths
of Stay than the overall average of 28
mos. for all DCFS kids.
Additionally, it is imperative to incorporate costs for the intermediary, research and evaluation, and
the independent auditor in the entire life of the bond. Children’s Home + Aid suggests the following
non-service Cost Assumptions:
Intermediary: 10% of service provision.
Currently, Children’s Home + Aid’s indirect rate for programs is 12% including those components
around insurance, IT, executive leadership and governance, human resources, and risk management.
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For purposes of the SIB, Children’s Home + Aid proposes to reduce this with the likelihood of “pay
for success” payments later.
Independent Auditor: $75,000 annually
As noted in the governance section later in this document, we suggest that the independent auditor
have an arms-length relationship with both the intermediary and the bondholders. The costs are
typically higher than for a regular audit due to the independent nature of performance cost savings
analysis, outcomes verification, and testing throughout the life of the bond.
Research and Evaluation: $75,000
Children’s Home + Aid has proposed using random assignment for the purposes of learning more
about the control group and betters assessing the efficacy of service provision over the long run. The
cost assumption is comparable to other typical research designs, and could fully support a RCT
suitable for both measuring impact and as tool for calculating savings, as we explain more fully in
Part E..
Analysis of Pricing and Efficacy of Service Interventions
While the previous chart outlines estimated costs to taxpayers, the following chart outlines the costs
of the service interventions as well as impact on counterfactuals. Counterfactuals are those results
which will occur in the absence of an intervention. As such, Children’s Home + Aid has carefully
estimated a counterfactual for those children exiting the DJJ system and entering the child welfare
system. Based on the Chapin Hall work, our counterfactual for this particular group is 10%.
Essentially, the counterfactual for the actual DIY (those youth already in child welfare) is not
relevant as the absence of no intervention is essentially the status quo.
Interventions
Multidimensional
Treatment Foster Care Adolescents (MTDC-A)
Cost Per
Client
Impact on
Counterfactual
Source
$ 7,739
Functional Family
Therapy (FFT)
$ 3,198
Multi-systemic Therapy
(MST)
$7,206
Wraparound Services
$2,357
N/A
Family Finding (Allen
October 2011)
$500
TBD
Est. Total Per Client
$7,000
25% for DIY;
50% for JJ at
Risk of CW
40-50%
OJJDP has conducted recidivism analyses;
Washington State Institute on Public Policy has
conducted ROI and costs.
(T. L. Alexander December 2000) (Washington
State Institute for Public Policy July 2011 Update)
Wraparound services can be quite varied,
depending on needs of services. This amount is a
guestimated.
Family Finding costs are relatively cheap as it’s an
integrated service based technology.
(Allen October 2011)
The $7,000 is the avg. client per client
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Budget Savings. The attachment (DIY Social Impact Bond Residual Analysis Using Cost and
Effectiveness Assumptions) incorporates all of the aforementioned assumptions around costs of
interventions, current costs to taxpayers, efficacy of interventions, cash flow of savings, and
potential residual savings available for “pay for success” residuals.
To determine impact, it is essential to assess the cost of the SIB AFTER the all of the costs:
 Service intervention (which assumes a 3% increase each year);
 Intermediary costs (which is 10% of the cost of intervention;
 Evaluation and independent auditor (which are $75,000 each for each of the life of
the bond)
 Counterfactual Costs for existing Beneficiaries
Pay for Success Component. The Children’s Home + Aid proposed SIB model has a powerful
leveraging component due to the targeted population having significantly current high service costs.
Any reduction in costs for the targeted population can therefore be determined as an actual portion of
per diem costs as these intervention costs would be directly paid by DCFS without the SIB. It is
imperative to note that such costs are not merely incremental but actual costs that are fully reduced
or eliminated due to the interventions. Unlike reductions in recidivism for incarceration, for
example, where the average cost per client includes significant costs that are not immediately
eliminated, the outlined costs in the proposed SIB model are costs that would be paid by DCFS
absent the service array in this SIB. The following illustration provides a high-level view of starting
costs, the DIY SIB investment costs outlined above, and the resulting savings that might accrue over
an eight year period based upon the success levels proposed for the interventions.
Further, Children’s Home + Aid believes that the cost savings approach is actually more clientcentered. While the idea is to reduce high-end costs for the target population, Children’s Home +
Aid also fully understands that each child and family has unique characteristics and that success for
Children’s Home + Aid ▫ Social Impact Bonds and Pay for Success RFI: Dually Involved Youth
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each family and child will be highly differentiated. As such, the costs of success will be different on
a client basis, thereby making a fixed payment based on an actual outcome difficult to determine.
This is the driving rationale for utilizing a RCT to generate estimates of savings based upon the
counter factual.
Guarantees and Stop Loss. Unlike recent SIBs in both New York City and Massachusetts,
Children’s Home + Aid proposes to have investors absorb complete financial risk without guarantees
from government. Due to Illinois’ challenging financial situation, such a government guarantee
would require a “set aside” of dollars that could not be used for other critical programs, particularly
in a time of significant cash flow challenges for vendors in the state.
Further, Children’s Home + Aid would look towards private philanthropy to be actual investors
through their program relative initiatives (PRIs) as opposed to acting as guarantors. As has been
demonstrated in the UK as well as Massachusetts, for example, many of the early investors have
come from philanthropy who have dedicated themselves as catalysts for a new form of financing the
social sector.
The nature of the risk of this SIB, therefore, is considerably higher for both investors and the
intermediary. Non-performance can mean complete loss of principal for investors, with government
held harmless. However, Children’s Home + Aid believes that the array of evidence-based practices
with a 5-year commitment creates the potential for an elegant initiative. It not only allows for
investors to get their principal back, but allows for them to receive a “pay for success” premium in
addition to actual savings for government
Part D: Funding Sources and Technical Support
Private Funding Opportunities. Children’s Home + Aid has developed a solid foundation of
private sector funding partners, including philanthropy, corporations and individuals, raising nearly
$5 million annually to support our mission in the areas of early childhood, child welfare and juvenile
justice. Given the right opportunity, we would be willing to ask our various supporters to consider
investing in a SIB to fund a Children’s Home + Aid administered project.


The Children’s Home + Aid Foundation. In the past, Children’s Home + Aid has actively
supported innovation and organizational development with operating support from the
organization’s endowment. With anticipated assets of approximately $17M, the Foundation
Board has expressed a willingness to explore investment options pending more details from
the state on investment structure, calculation of return and other items specified in any final
SIB proposal emerging form this process.
Philanthropy. Children’s Home + Aid is a well-known organization receiving support from
private foundations throughout Illinois and nationally. This has included major gifts from
organization’s with a strong interest in SIBs as an alternative funding strategy for promising
innovations. Over the last five years, contributions from private sources to Children’s Home
+ Aid totaled $32 million. We believe our relationship with private supporters provide an
excellent starting point for exploring partnerships which could take the form of guarantees
for private investors or those willing to provide operating capital or direct investment in
project work funded through a SIB.
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A Unique Public Funding Opportunity. While the heading “public funding” may sound strange in
the context of a SIB proposal, we believe that there is a unique option available to Illinois which
would allow the state to receive and keep any federal dollars saved by meeting the outcomes
outlined in the SIB. Specifically, if structured correctly, work undertaken in the context of the DIY
SIB could be the basis of a Title IV-E waiver proposal to the federal government allowing Illinois to
spend federal dollars on the services outlined in the DIY SIB while retaining any IV-E savings
generated by reducing the cost of placements with less restrictive settings and less time in care.
Illinois currently leads the country in use of IV-E waivers, and was recently awarded an additional
waiver in the first round of waivers which HHS is authorized to make over the next two years. Since
their inception in 1997, Illinois has used IV-E waivers to capture more than $100M in federal dollars
resulting from savings generated through service innovations that reduced the cost of out-of-home
care. In a similar way, the DIY SIB could open the door to sustain the innovation using public
dollars to scale up the innovation and provide an ongoing vehicle to capture and maintain the savings
associated with IV-E expenditures. Children’s Home + Aid played a crucial role in bringing the
most recent waiver to Illinois, working directly with staff at the Illinois Department of Children and
Family Services to frame what is now known as the Illinois Birth to Three Waiver. We are
convinced that exploration of the DIY SIB in conjunction with a waiver application in the following
year could be a unique “one-two punch” for Illinois which could generate significant dollars for
program replication and sustainability over a longer period of time.
Technical Support. Children's Home + Aid has had initial conversations about our target
population and evaluation approach (described in Part E) with leadership from the Third Sector
Capital Partners, who have partnered with Massachusetts to serve as lead intermediary in the
nation’s first SIB sponsored by state government. Should the opportunity for a SIB targeting DIY
emerge in the form of an RFP in Illinois, Children’s Home + Aid would welcome the opportunity
to work with Third Sector to accomplish the deal construction and financial arranging required for
the project.
Part E: Evaluation of Outcomes and Calculating Savings
Evaluation Approach. Children’s Home + Aid sees an incredible opportunity to shape the
emerging discussion on SIBs by using an evaluation approach which has not yet prominently
emerged in discussions with states and localities undertaking this work. Specifically, Children’s
Home + Aid believes there is enormous benefit in using an experimental design featuring random
assignment to determine a) the relative success of the pilot funded through the SIB and b) to
calculate savings. This approach represents something of a contrast to existing SIBs which have
relied heavily on pre-determining benchmarks and estimating the savings accrued from achieving the
proposed outcomes. Use of a Randomized Control Trial (RCT) would allow for a comparison group
against which actual costs could be tracked and compared. Any differences between the treatment
group (those DIY receiving SIB-funded pilot services) and the control group (a statistically
comparable comparison population of DIY) would be the basis determining whether or not our
proposed innovations are generating savings, and how much.
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The illustration below helps outline how this approach to a SIB becomes a clean, effective means for
evaluating the success of the SIB, as well as calculating on a virtually real time basis the actual
savings that are accruing to the state.
In this example, DIY represented by the intersection of DCFS and DJJ populations are randomly
assigned to either a population served by the SIB-funded pilot or the control group. The evaluator,
in partnership with appropriate state agency staff, develop a mechanism to tag and track youth, their
experiences while in care, and the resulting costs. In the example above, over the duration of the
project DIY assigned to the control group show an average daily cost of $130, while a statistically
comparable group assigned to the SIB-funded pilot project are showing an average daily cost of
$218. Multiplying this difference by the number of DIY in the treatment or pilot group and then
calculating this difference over the duration of the project yields a direct calculation of real savings
resulting from the proposed interventions. Using the example above, if 75 DIY were served for a
total of 90 days at a cost of $218 per day, when compared to the control group, the estimated savings
resulting from the SIB-funded pilot would be $594,000 ($88 x 75 DIY x 90 days). Annualized, the
savings would be $2,376,000. Depending upon the design of the SIB, this pool of savings could be
shared by the state and the investors in the SIB.
This approach is not new to Illinois. It has been the basis for negotiating IV-E waivers for the state’s
numerous child welfare waiver demonstrations which have brought millions of dollars in additional
federal claiming into Illinois. Children’s Home + Aid proposes to work with Dr. Mark Testa at the
University of North Carolina, Chapel Hill to design a similar approach which could be used for a
DIY SIB in Illinois. Dr. Testa is the architect behind all of Illinois’ successful waiver
demonstrations, and has a long history of working with Children’s Home + Aid on a number of state
and national research projects. If the DIY SIB is successful in generating an RFP from GOMB,
Children’s Home + Aid would also propose using a future IV-E waiver application to support
scaling up the work and capturing federal dollars to sustain work beyond the initial SIB. We see
incredible alignment in the financing strategy represented by the SIB and IV-E waivers which both
allow future savings to be invested in evidence-based interventions in the present.
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Given Dr. Testa’s experience working with administrative data from Illinois, constructing a reliable
method for evaluating outcomes for those DIY served through the SIB-funded pilot will be fairly
straightforward and readily available, and would be part of a more detailed response to any RFP
issued by GOMB in pursuit of developing the DIY SIB. In each of Illinois successful waivers
demonstration projects, the finalized evaluation design included not only a methodology for
calculating costs differences but also a more comprehensive evaluation which looked at child and
youth well-being. It’s expected that this would also be part of the evaluation expectations for a
successful SIB.
Finally, Children’s Home + Aid is also proposing to work with Dr. Joseph Ryan at the University of
Michigan. Dr. Ryan is a national thought leader on the emerging research around DIY, having coauthored numerous articles with Dr. Testa and others examining this population in both Illinois and
Washington State. His work, cited throughout this document, reflects a detailed understanding of
the target population, as well as a variety of methodologies for evaluating success. We believe that
Dr. Testa and Dr. Ryan have the experience and know-how to construct a thorough and meaningful
evaluation plan that will satisfy any requirements issued through a follow-up RFP.
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SECTION 3.3: DESCRIPTION OF GOVERNANCE STRUCTURE
It is our view that the state has considerable latitude for designing the right organizational structure
for operating a SIB. We believe that a thorough review of responses to the state’s call for an RFI
will provide better information on how to ultimately frame the right organizational structure for a
proposed SIB. Additionally, this may also be something that warrants more detailed discussion
suitable to an RFP. Whatever the approach, there are clearly at least three roles critical to the launch
of a SIB: 1) financial; 2) oversight and operating support; and 3) service provision. We believe that
all three can be supported by a qualified Intermediary Entity.
Part A: Roles and Responsibilities
Intermediary: Children’s Home + Aid has not only demonstrated its implementation of evidencebacked strategies, but has experience in acting as a lead agency in working with sub-contractors and
providers. The accredited nature and strong fiduciary management of the agency allows it to scale
enhanced scope to support the transactional components of a SIB.
Children’s Home + Aid proposes to create a network form of governance similar to an Accountable
Care Organization (ACO) within a healthcare setting. Within the eco-system, all stakeholders are
directly held accountable for their various roles; otherwise, actual capital dollars are lost to the
system not to mention potential benefits to the beneficiaries.
As Children’s Home + Aid is an accredited organization with the Council on Accreditation (COA),
Children’s Home + Aid would explore seeking accreditation under the COA network standards to
enhance strong communication, connectivity, data sharing, and decision-making within the network
eco system.
Accessing Capital Markets: Children’s Home + Aid has been able to leverage its public funding
from various government agencies with significant private philanthropy. In the last five years,
Children’s Home + Aid has privately raised $32.6 million from individual donors, foundations, and
corporations. Coupled with $17 million in liquid assets and a healthy balance sheet, Children’s
Home + Aid is solidly positioned to demonstrate management of the SIB over the full eight-year
timeframe.
Further, Children’s Home + Aid’s Board represents leadership from a combination of private sector
organizations with an active interest in the emerging discussions around SIBs. These organizations
include leaders from a plethora of global financial institutions, private equity groups, and investment
advisors. Trustees from these enterprises have played a critical role in shaping Children’s Home +
Aid’s strategy and recommendations for the RFI by serving on an ad hoc advisory group assembled
to guide our response and are interested in working with GOMB on the design of a SIBs. As such,
our agency has the leadership capacity to access the capital markets for a strongly-designed SIB. An
example of this emerging leadership is found in Section 3.4, where we outline some initial thoughts
around attracting more private capital to the SIBs arena.
State of Illinois: The State has committed itself to move forward on the development of a SIB. The
new and complex process of a SIB will require ongoing leadership and follow-through by the State.
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As the SIB process involves the development of a new methods of care managemetn, new roles and
responsibilities of various State leaders must be clarified to ensure partner accountability.
Further, the integrity of the SIB process will only be upheld through meaningful dialogue,
evaluation, and learning through the life of the bond. As such, the State must plan a continually
visible role in the entire process.
As noted in the literature on collective impact strategies, a network with a backbone organization is
critical for ongoing success. While Children’s Home + Aid will play a significant role as the
intermediary, we believe the State should support this effort.
The following are specific ideas that we would recommend:
 Governor of the State of Illinois to Create an Illinois “SIB Network Alliance” through
Executive Order: As Government must be a significant partner, particularly around
interagency coordination, we suggest that the Governor, through Executive Order, establish a
“SIB Network Alliance” as the network for the SIB. Public-private initiatives such as the
Child Welfare Advisory Committee (CWAC) have been created in the past through
Executive Order and have created an institutional framework to allow for substantial
collaboration policy formulation. Further, we suggest that the Director of GOMB either
chair the Alliance or appoint an appropriate individual;
 Liaisons from DCFS/DJJ/DHS: Members of the Alliance ideally should include Director
appointed liaisons from DCFS, DJJ, and DHS to facilitate communication and coordination
among the intermediary and respective staff;
 Representatives from the Task Force on Social Innovation, Entrepreneurship, and
Enterprise: The Task Force has been an invaluable leader in the last year in facilitating
discussion around budgeting for results, innovative ideas, and pay for performance initiatives
such as the recommendation for a SIB. As such, we’d recommend representation from this
Task Force on the Alliance;
 Beneficiary Representation: We suggest that members of the beneficiary population,
particularly a parent and youth, also be represented on the Alliance;
 Investor Representation: We suggest representation from investors to also be members of
the Alliance. The investors, as such, can be exposed to the complexity and evolution of the
SIB process and new eco system that would develop;
 Community Representation: Other community members not directly involved in the
ecosystem can also be represented on the Alliance. These could include community
advocates, foundation leaders, business leaders, or faith-based leaders.
Independent Outcome Evaluator: As referenced earlier, we suggest that the independent outcome
evaluator actually be a public accounting firm regularly reviewing data generated from the RCT
comparisons. As the calculation of savings will be critical to offer payments for both bond proceeds
and pay for success, such a firm should be “arms-length” from the intermediary and the bond
holders. This entity would assess whether proposed outcomes are occurring and what the savings
are for each. As such, we suggest that the SIB Network Alliance procure and hire the accounting
firm with GOMB being a point of contact for the firm.
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Research and Evaluation Entity: As noted earlier, Children’s Home + Aid has a number of
relationships with university-based researchers. To assist in further clarifying the counterfactual on
the DJJ kids at risk of entering child welfare, as well as provide descriptive evidence on the service
interventions, we propose that the Research and Evaluation entity conduct a Randomized Control
Trial. To ensure the fidelity of the nature of DIY high-end and low-end kids currently in DCFS
custody, we suggest that the Research and Evaluation entity be jointly selected by DCFS and
Children’s Home + Aid contingent upon approval by the Alliance.
Part B: Effective Structure
The SIB Network Alliance as designed would serve as the governance structure for the SIB process.
Ideally, the SIB Network Alliance should be set up prior to the launch of the SIB and actually finally
approve the timeline.
The SIB Network Alliance will be critical in ensuring the SIB evolve in a manner that is consistent
with the original intent, creating a formalized venue for coordination, allowing for data transparency
of the SIB outcomes and savings, and supporting an open learning community to further benefit
social finance developments in Illinois.
Part C: Alternatives
The service interventions, particularly the five that Children’s Home + Aid is proposing in this SIB
network, could actually be enhanced through direct provision of services for the targeted
populations. For example, despite the high ROI of FFT (as demonstrated by the Washington State
Institute for Public Policy (Washington State Institute for Public Policy July 2011 Update)) and
explored in other social finance areas, there are actually only two FFT sites in Illinois. However,
those two sites are not located in Cook County and are not directly being utilized for DIY.
Further, the nature of our proposed SIB solution is essentially a complex and relentless utilization
management program for vulnerable youth who are quite expensive for taxpayers. The State could
pursue an independent entity that could be empowered to make assessment and service decisions.
Such a process would require substantial interdepartmental coordination and long-term
sustainability. Moreover, such an initiative would not be subject to the vagaries of the annual
appropriations process.
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SECTION 3.4: OTHER ISSUES OR CONSIDERATIONS
Creating a real market. The view of the Board at Children’s Home + Aid is that serious investors
continuously monitor and adjust their portfolios in pursuit of the highest risk adjusted returns that
their skill can attain. Since the savings anticipated from innovative service models would tend not to
be very sensitive to changes in the macro-economic environment, serious taxable and tax-exempt
investors would naturally be intrigued by the highly diversifying nature of the stream of payments to
which holders of SIBs would be entitled.
While some charitably inclined investors, notably faith based endowments, have been known to
provide limited financing to some not-for-profits in exchange for a promise to repay, the vast
majority of taxable and tax-exempt investors have preferred to optimize their investment returns and
then, separately, donate or grant a portion of those returns to worthy not-for-profit agencies. For
serious investors to buy SIBs the potential returns need to be attractive and there needs to be a liquid
aftermarket for these securities.
Said differently, for serious private and institutional investors to consider an allocation to SIBs, the
bonds would have to provide a competitive stream of payments (a function of the potential savings
generated by projects funded with bond proceeds) at defined intervals. Moreover they would have to
enjoy a state guarantee. Each payment would have to be a prescribed portion of the measurable
savings associated with a particular innovative project vs. a control group. The State or its agent
would have to regularly provide information that initially would allow investors to forecast the
amount of savings to which they would be contractually entitled and thereafter to update those
forecasts. The bonds would have to be registered and market makers developed so that investors
could adjust their exposure to reflect their continuous reappraisal of future savings.
To help the market infrastructure for SIBs to develop, Illinois may start with a program employing
unregistered securities privately negotiated with organizations like Children’s Home + Aid which
have a pre-existing interest in seeing a market for SIBs develop. As suggested above, Children’s
Home and Aid might consider using some of its own liquid capital to fund the proposed project for a
share of the savings vs. the control group, if any. We could envision monthly coupon payments for a
period of years. The coupon payments might be a negotiated per capita amount due. Every sixth
payment would include the investor’s share of the savings over the six month period. Depending
upon the estimated return on its investment, the bond might be retired gradually over its life much as
a home mortgage is retired over its life, or the principal might be redeemable.
During the program development phase and after issuance our state would work with the State to
develop the kind of reporting protocol disinterested investors would require. If the return to
Children’s Home + Aid from a private SIB issued to it by Illinois proves attractive, other investors
will become interested. If and when the State senses enough interest, it can register an issuance
which, in the opinion of counsel, would be exempt from federal income taxes. Taxable investors
would compete for the bond on the basis of who will accept the smallest percentage of achieved
savings on projects operated by a given known and respected agency.
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ATTACHMENT
Preliminary and Confidential
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