1. Designing a Pay for Success/SIB Pilot Case Study: Massachusetts Juvenile Justice 25 September 2014

2. The information is materially sourced from Third Sector Capital Partners and Roca, Inc.; the two private sector firms selected to lead and implement the largest PFS/SIB transaction in the U.S. to date (and globally).

3. Risk Mitigation Significant Unmet Needs and Targetable Population Net Financial and/or Social Benefit Interventions that Work Track Record of Credible Data Leadership from Stakeholders Service Providers with Capacity to Scale Reminder: The Key Criteria for a PFS Project

4. Outputs and Outcomes OutputsOutcomes 1,302 Youth Served Through RocaSocial Impact (Base Case) 45% reduction in bed days of incarceration 30% increase in employment Rigorous Random Control Trial (RCT) Evaluation) Government Procurement Tied to Results and Savings Government Procured Project Management Path to Sustainability for High Performing Organizations A New Paradigm for Philanthropy 4

5. Roca’s Record of Reduced Incarceration and Increased Employment RecidivismEmployment 33% Reduction 66% Reduction 100% Increase Funds will allow Roca to serve 1,302 very high risk young men through 4.75 years of enrollments. 5

6. A Significant Need: Young Men at High Risk of Incarceration Each year, approximately 4000 high-risk young men “age out” of the juvenile justice system or are released from probation in Massachusetts. 60% Percent who will be incarcerated at least once within five years of release. $47,500 Estimated annual average cost per prisoner to Massachusetts; marginal cost is $12,410. 2.55 years Average time spent in correctional facilities. $291 million Total incarceration expenses incurred by Massachusetts per cohort of 4,000. Based on study of 10 years of criminal justice data by the State and completed in 2012. Subsequent studies show slightly different incarceration rates and average sentences. 6

7. Breaking the Cycle of Incarceration Engagement Behavioral Change Sustainable Employment 2 Years: Intensive Services2 Years: Follow Up Roca’s Intervention Model 7

8. Roca Risks and Opportunities 8 OPPORTUNITIES Expanded level of service delivery including new communities Expanded service delivery in Boston Participation in randomized control trial evaluation Access to public data systems to demonstrate success of model Establish predominant public funding source Attract future support and position Roca for future project Potential for future scale and sustainability Significant government change RISKS Increased public attention, scrutiny and interest Pitfalls associated with random control trial evaluation Need to scale up institutional relationships in new communities Challenges associated with working with MA Probation

9. Massachusetts Potential to Achieve Savings Savings PFS Payments Base Case 45% Reduction Target Case 65% Reduction Sr. Loan Repayment 22% Reduction There are additional PFS sources not included here. Incarceration Savings and Payments 9

10. Government Leadership Governor’s Announcement Engagement of State Secretary of Finance & Administration Legislative changes to procurement rules Engagement with Harvard’s Center for Social Impact Financing Issuance of Request for Information Issuance of Request for Proposals Time & Resources committed to design and implement 10

11. Commitment of all Stakeholders: The Timeline for Massachusetts PFS/SIB State announces program for $27 M of PFS payments backed by “Full Faith and Credit” Structure & Negotiations Completed State makes success payments for: - Reduced incarceration - Increased employment - Job readiness State makes success payments for: - Reduced incarceration - Increased employment - Job readiness Roca delivers services Rigorous and ongoing evaluation Roca delivers services Rigorous and ongoing evaluation Success payments replenish working capital 2012 Fall 2013Years 1-6Years 5 + 6 Year 6 11

12. Entities Involved in the Project ENTITYRESPONSIBILITIES Office of the Commissioner of ProbationRefer Youth to Program Hampden, Middlesex, Suffolk and Essex County Sherriff Depts. Refer Youth to Program Department of Youth ServicesRefer Youth to Program Exec. Office of Public Safety and SecurityRefer Youth to Program Dept. of Criminal Justice Information ServicesProvide CORI data for a) screening youth and b) measuring success Exec. Office for Administration & FinanceOversee procurement and payment Exec. Office of Labor and Workforce Development Serve as fiscal agent for US DOL grant; provide employment data to measure success Exec. Office of EducationProvide data to measure educational impact RocaDeliver services to youth Youth Services, Inc.Serve as fiscal intermediary and project manager SibalyticsImplement evaluation plan Public Consulting GroupVerify correct implementation of evaluation plan InvestorsProvide working capital to YSI Blue shading: Commonwealth Entities Yellow shading: Non-governmental entities 12

13. A Public-Private Partnership -Is the government’s main counter-party -Ensures an integrated service delivery -Is accountable for the outcomes -Arranges the private financing -Provides service delivery -Scales its operations to serve more youth -Builds upon proven intervention program -Focuses its own staff on outcome metrics vs. inputs/outputs Commonwealth of Massachusetts -Moves from prescriptive contracting to outcome-based contracting -Does not provide service delivery funding -Coordinates among various government agencies to facilitate service delivery and monitoring -Uses its existing administrative data as basis for evaluation, thereby lowering M&E costs Goldman Sachs, Arnold Foundation, Living Cities, etc. -Take on performance risk -Do “due diligence” on capacity to deliver outcomes -Ensure sufficient funds are in place 13