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Social Return on Investment: Practical Tools for Cost Benefit Analysis

Social Return on Investment: Practical Tools for Cost Benefit Analysis. Reclaiming Futures Webinar Kristina Smock Consulting July 28, 2010. What is Cost-Benefit Analysis?. Do the economic benefits of providing this service outweigh the economic costs?. Benefit-to-Cost Ratio.

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Social Return on Investment: Practical Tools for Cost Benefit Analysis

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  1. Social Return on Investment: Practical Tools for Cost Benefit Analysis Reclaiming Futures Webinar Kristina Smock Consulting July 28, 2010

  2. What is Cost-Benefit Analysis? Do the economic benefits of providing this service outweigh the economic costs?

  3. Benefit-to-Cost Ratio monetary value of benefits monetary costs of obtaining them

  4. Case Study • Prevention • Engagement • Housing • Education and jobs

  5. Calculating Costs • Divide budget into individual program areas that each match with a specific outcome • Include all costs that are necessary in order to achieve the outcome • Time period for costs should match time period for outcomes • Make sure all relevant costs are captured in your final cost-benefit ratio

  6. New Avenues’ Costs

  7. Outputs and Outcomes

  8. No Outcome Data? • Apply your output data to studies showing the outcomes of similar interventions. • Calculate how many people would have to benefit for the program to pay for itself. • Compare the costs of two alternatives.

  9. Sample Outcomes

  10. Identifying Benefits • Direct benefits to individual participants • Benefits to other individuals • Cost savings to society • Financial returns to society

  11. Sample Benefits

  12. Calculating Monetary Value of Benefits

  13. Calculating Actual Cost Savings Based on Government Records

  14. Challenges of Calculating Actual Cost Savings from Records • Privacy issues • Data base incompatibility • Time lags • Getting cost data • Finding a comparison group

  15. Examples from New Avenues

  16. Example 1: Reception Center

  17. Example 2: Runaways

  18. Example 3: Jobs

  19. Example 4: Victimization

  20. New Avenues’ Findings New Avenues saved the community the equivalent of $4.12 for every $1.00 it spent in 2004-05 across all of its programs

  21. Challenges of the Methodology • Multi-layered research • Time consuming and labor intensive • Detailed documentation required • Not all benefits can be captured

  22. PLANNING TOOLS

  23. Cost-Benefit Worksheet Example • Cost of program or program component: $195,203 • Unit of cost: Per year • Number of youth served by program component during time period covered by unit of cost: 456 runaway youth were served • Outcome during same time period: 100% of runaway youth served were reunited with their families or connected to appropriate services when reunification wasn’t possible. • Primary or secondary data tied to outcome showing what would have likely happened to participants without the intervention: Nationally, 40% of runaways end up homeless. • Data showing per unit monetary equivalent of outcome: Nationally, about half of all homeless youth access shelter services, for an average of 4 months. The cost to provide shelter and basic services for each youth who accesses it is $62 per night, or an average of $7,440 for 4 months. Since only half of all homeless youth access shelter services, the average cost per youth is $3,720.

  24. Calculate Ratio 100% x 1,392 x $221 Answer 5 x Answer 3 x Answer 6 Answer 1 195,203 = $1.58 in benefits for every dollar spent per year

  25. Total Cost Benefit Total cost savings for the costs in Answer 1: $678,528 + $307,632 $195,203 = $5.05 in benefits for every dollar spent per year Note: Numerator and cost benefit ratio are slightly different than in the report because of differences in rounding.

  26. Questions and Discussion

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