Social impact - Broadening your horizons
21/12/2009
At Baker Tilly, we are seeing a significant number of third sector organisations starting to feel increasing pressures from funders that wish to reduce donations or that want to see more effective justification for the funding they provide.
In the past, charities have been able to address challenges to funding by focusing on the human outcomes of their work or by providing justifications for their running costs.
Both of these approaches lack the strength needed to meet the new challenges that have arisen from the increasing use of project appraisal approaches by funders, which we expect to become more widespread in the wake of the Office of the Third Sector’s recent paper advocating the use of Social Return on Investment ('SROI') to measure Social Impact.
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The introduction of the Public Benefit test further increases the need to provide a clear and well-reasoned justification for the activities of all charities.
In order to meet this new challenge, charities need to present a more robust set of arguments that convert human outcomes into a measurable Social Impact, allowing the costs of funding to be weighed against the benefits derived (or, indeed, damage avoided) by the funders, and society as a whole, as a result of a charity’s activities.
By working with you to use this approach we can help you to:
- demonstrate the value that an organisation adds to funders and wider society, in order to defend against cuts or argue for increased funding,
- forecast expected outcomes from both existing and new activities and develop future measures for assessing performance,
- show that the now mandatory Public Benefit test has been taken seriously and clearly met.
Our work places stakeholder engagement at the core of this process. We act as facilitators to help you to build your understanding of how your beneficiaries and funders value the work you do with and for them.
As Social Impact becomes more widespread, it is important for the sector to act now to adopt Social Impact measurement and set the agenda for future funding. To ignore this is to remain on the back foot when defending against funding cuts and risks losing the initiative to set the agenda for how your organisation will be measured in future.
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Social Return on Investment ('SROI') uses reasonable measures of the values of human outcomes as ‘proxies’ that stand in the shoes of those outcomes to the extent that they are measurable. We can build our understanding of these ‘proxies’ by considering three broad types of benefit that are typically created by third sector organisations:
- Economic benefit created: where, either at a micro or macro level, there is an impact on earning capacity, consumption of benefits, reliance on welfare systems, on productivity, on tax revenues, or on trade or indeed wider social or environmental benefits (e.g. an intervention to assist a homeless person in training and finding employment creates additional tax revenues).
- Costs saved or not wasted: where the intervention results in a saving in the cost of other interventions, consequential costs, or increases the effectiveness of another intervention (e.g. an intervention to rehabilitate a drug user is likely to reduce the need for interventions by the health service and police allowing these resources to be redirected).
- Alternative or cheaper sourcing: the saving achieved where the intervention directly replaces another more expensive one (e.g. a charity provides information and research to government at a lower cost than a commercial research agency would charge, thus achieving a saving).
A single service may achieve benefits in more than one of these ways. We work with our clients to consider key services from different perspectives to ensure that the full extent of the benefits is derived, whilst avoiding double-counting.
From the total benefits derived we then deduct amounts for outcomes that would have happened anyway, the value attributable to other interventions and the value of any consequential damage arising as a result of an intervention. This then produces the net benefit to society.
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For the first time of measurement, it is suggested that these evaluations are based on reasonable assumptions that reflect the outcomes measured. This initial exercise then provides a framework of Key Performance Indicators that can be measured in future to monitor Social Impact.
When you have established how outcomes will be monitored, systems can then be put in place to collect data so that ongoing reports are based on actual data to the greatest extent possible.
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At Baker Tilly we have a strong commitment to support the ongoing success of the Third sector within the UK, both as a leading provider of audit services, and through our advisory practice that supports organisations through times of strategic change.
As social impact becomes an increasingly important part of the Third Sector agenda, we are delighted to have helped organisations to produce independent reports that evaluate their Social Impact and set the agenda for future funding discussions. We welcome the opportunity to help the sector to develop the tools it needs to meet this new challenge. For further information on how SROI can help your organisation, please contact
Jim Clifford
Head of Charity Advisory Services
Mobile: 07860 386081
Email: jim.clifford@bakertilly.co.uk