6. Valuing change
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6.1 Financial proxies
Financial proxies are used to value an outcome where there is no market value. The use of proxies in this SROI forms a critical component of the valuation exercise as most of the outcomes identified have no market values. There are a number of techniques used to identify financial proxies and value outcomes. Importantly, within an SROI, the financial proxy reflects the value that the stakeholder experiencing the change places on the outcome. This could be obtained directly through stakeholder consultation, or indirectly through research. Techniques for valuing outcomes are included in Appendix 4.
Financial proxies in this SROI analysis have been identified using the revealed preferences technique for the young people, and families and significant others stakeholder groups. The resource reallocation technique was used to develop financial proxies for the justice system. Where relevant, for consistency the same financial proxy values have been used across the different IJP programs analysed in the project.
For the outcomes experienced by the young people, the financial proxies capture the full value of the outcome across the stages of development. For example, when considering the outcome 1.1 Increased self-esteem, a proxy was developed to capture the full benefit to the young person who will experience stages A, B, C and D of development during their time in the program. This is the point in time that the young person is able to exercise their own agency (Stage D).
The main challenge faced when determining the most appropriate proxy for the outcomes experienced by the young people was being able to capture the full value of the outcome they will achieve when they reach their full potential within the program. During the consultation stage we were only able to engage with the young people that were at the beginning of their journey with the program. We therefore had to rely on the anecdotal evidence provided by the program managers about how the young people would potentially value the different changes.
While the age and communication skills of the young people made it difficult to test possible financial proxies, some testing did take place. One young person who was asked how much he would pay to experience the same changes as the program gave him said "whatever it costs, I would pay". With another young person, flashcards were used which had the names of different things he liked to do (i.e. play football, ride a motorbike, use his mobile phone, fishing) on them. He was asked to order these from his least to most favourite activities, and then to place the program among them according to how much he valued it compared to the other items. These responses were considered when developing the financial proxies.
It was also not feasible to test the final financial proxies directly with the program beneficiaries, in part due to a limited cognitive ability of clients and difficulty in accessing family / significant others. However, the proxies were sense tested with the Department as well as program managers to make sure they are relevant and are not over-valuing or under-valuing the change that is created as a result of the program. The final proxies that were chosen relate specifically to the outcomes experienced.
Table 6.1 shows the full value of the financial proxies for each of the outcomes, as well as a description and rationale for selecting each proxy.
| Outcomes | Financial proxy description | Full proxy value | Rationale |
|---|---|---|---|
1.1 Increased self-esteem |
Cost of counselling sessions required to achieve the same outcome (assumes need 367 sessions to achieve a full outcome) |
$26,023 |
The work program managers' do with the young people has a similar impact as counselling sessions. |
1.2 Increased engagement in meaningful activity |
Independence test for Youth Allowance |
$26,201 |
Young people qualify for the independence test once they have participated in full-time paid employment for at least 18 months within any two year period. This approximates the market value of engagement in a meaningful activity. |
1.3. More positive connections to others |
Cost of running an afterschool activity centre |
$12,840 |
Through a group activity the young people access a support network. |
1.4 Reduced likelihood of detention or incarceration in the future |
Difference between annual Newstart allowance and minimum wage |
$19,081 |
Participation in unlawful behaviour has a negative impact on employment prospects, increasing the likelihood that the young person will be receiving income support (Newstart allowance) rather than being employed (receiving minimum wage). The difference between the minimum wage and the Newstart allowance amount approximates the value of avoiding unlawful behaviour. |
| Outcomes | Financial proxy description | Full proxy value | Rationale |
|---|---|---|---|
2.1 Improve communication between family members |
Cost of family group therapy for one year (10 sessions) |
$7,388 |
Replacement valuation: Cost of treatment addressing family communication issues. |
2.2 Increase engagement in lives of the young people in their care |
Average weekly expenditure on recreation by the lowest gross household income quintile in NSW |
$3 575 |
A family's weekly recreational spend is indicative of the cost of families doing activities together, which involves families and significant others engaging with the lives of young people. |
| Outcomes | Financial proxy description | Full proxy value | Rationale |
|---|---|---|---|
3.1 Improved perceptions of young people |
Cost of volunteer time contributed by a community member to the program, based on the assumption that ongoing support during the formative / development years of the young person is required (i.e. 5 years), at a rate of 2 hours per week |
$8,512 |
The community members who volunteer their time for the young people in the program improve their perception of the young people as a result of interacting with them. |
| Outcomes | Financial proxy description | Full proxy value | Rationale |
|---|---|---|---|
4.1 Reduction in anti-social behaviour |
Additional cost of policing to monitor anti-social behaviours of young people in the community |
$3,324 |
Time reallocated towards other activities, as a result of decreased need in the community to patrol at night and maintain safety. |
4.2 Decreased number of young people offending |
Average costs to the justice system per young person offending (excluding costs associated with policing anti-social behaviour) |
$5,180 |
Aggregate of police costs, court costs and juvenile justice costs which are all costs incurred when a young person offends. |
4.3 Decreased number of young people in detention |
Difference between average detention cost and average cost of community based supervision |
$33,096 |
Resource reallocation: Government can reallocate funding for juvenile justice as a result of participants in the program being supported by the program managers. |
4.3 Decreased number of young people in detention |
Average cost of juvenile justice stay |
$35,028 |
Resource reallocation: Government can reallocate funding for juvenile justice as a result of participants in the program avoiding contact with juvenile justice. |
If a young person progresses through one or more stages of development, he or she is deemed to have experienced all four outcomes. The significance of the change depends on the number of stages that the young person moves through during the investment period. Most of the young people will only experience some stages of development, and therefore some part of the outcome, during the investment period. This is because some clients started the program before the investment period, and others will not progress through all stages during the investment period.
Therefore, a proportion of the value of each financial proxy has been applied that corresponds to the specific change that different young people experience during the investment period. It was assumed that each stage of development is equally valuable to the young people, i.e. each stage of development is equal to the 25% of the total value of the outcome (and therefore the financial proxy value). The number of stages each young person is able to experience during the investment period determines the value he or she derives from the program. Table 6.2 shows the proportion of value that is assigned to the change based on the indicator used to measure that change.
| Indicator | Extent of change | % of value |
|---|---|---|
# young people that joined the program during the investment period and will reach Stage A |
One stage |
25% |
# young people that joined the program during the investment period and will reach Stage B |
Two stages |
50% |
# young people that joined the program during the investment period and will reach Stage C |
Three stages |
75% |
# young people that joined the program during the investment period and will reach Stage D |
Four stages |
100% |
# young people that will move from Stage A to Stage B during the investment period |
One stage |
25% |
# young people that will move from Stage A to Stage C during the investment period |
Two stages |
50% |
# young people that will move from Stage A to Stage D during the investment period |
Three stages |
75% |
# young people that will move from Stage B to Stage C during the investment period |
One stage |
25% |
# young people that will move from Stage B to Stage D during the investment period |
Two stages |
50% |
# young people that will move from Stage C to Stage D during the investment period |
One stage |
25% |
For a detailed description of the valuation of each of the outcomes including the calculations and the source of the financial proxy, please refer to Appendix 7.
6.2 SROI Filters
To present an accurate view of the value created through the Helping Hand and Linking Youth program, valuation filters (SROI filters) are applied to the financial proxies. This is in accordance with the SROI principle of not over-claiming. The SROI filters adopted for this project are discussed in Appendix 5.
Different techniques were used to identify the most appropriate filter for each of the outcomes.
Deadweight
To estimate how much of the change will happen anyway (i.e. without the intervention of the project) where possible a comparable population data was used. In other cases, stakeholders were asked to estimate the degree to which they believe the change will occur anyway.
Attribution
An estimate of how much of the change is forecast to be as a result of other stakeholders or activities which were not included in the investment was determined through stakeholder engagement. The attribution assumption is the same across all four outcomes as the input from other stakeholders will not contribute towards one specific outcome, instead their input will contribute to all of the outcomes.
However, attribution of these other stakeholders will differ for different stages of development the young person is at. At early stages of the development, project activities will be at the core of the changes experienced by the young people. At later stages attribution will increase as young people become more connected into other support networks.
Displacement
Stakeholder engagement was used to identify if any of the outcomes will displace other activities. No activities were identified that will be displaced as a result of the activities of the program.
Duration and Drop-off
Duration refers to how long an outcome lasts for. Through stakeholder consultation, as well referring to industry benchmarks, it was projected that outcomes experienced during the Stages A, B and C will only last for the duration of the program, however, outcomes experienced during Stage D of development will continue for another 2 years after the duration of the program.
Drop-off recognises that outcomes may continue to last for many years but in the future may be less or, if the same, will be influenced by other factors. Through stakeholder consultation, it was determined that the influence of the program will diminish at a rate of 50% per annum after the program.
The specific SROI filters applied to each outcome in this analysis are included in Appendix 6.
The application of the SROI filters calculates an adjusted annual value for each financial proxy identified for the analysis. This adjusted value represents the value of the outcome that can be solely attributed to the investment described in this analysis.
A worked example of the adjusted value for the 2.1 Improved communication between family members, a change experienced by family and significant others, is included in Figure 6.1 below.
Figure 6.1 - Worked example for adjusted value of the outcome
Please note that this outcome will last for 5 years which is the period of the investment. The drop-off per cent has not been applied, so the Adjusted Value reflects the value that is forecast to be created in one year.
6.3 Value of outcomes
The total adjusted value is the value calculated for each outcome, which takes into account the following components:
- Financial proxy: value of the outcome
- SROI filters: accounting for whether the outcome happened anyway (deadweight), who else contributed to the change (attribution), whether the outcome displaced other activities or outcomes (displacement) and the how long the outcome lasts for (duration and drop off)
- Quantity: the number of stakeholders experiencing an outcome
The following table is a summary of the total adjusted for all of the outcomes experienced by each stakeholder group.
| Outcomes | Total value for outcome |
|---|---|
1. Young people |
― |
1.1 Increased self-esteem |
$1,154,585 |
1.2 Increased engagement in meaningful activity |
$1,151,668 |
1.3. More positive connections to others |
$569,687 |
1.4 Reduced likelihood of detention or incarceration in the future |
$959,488 |
2. Families and significant others |
― |
2.1 Improve communication between family members |
$223,010 |
2.2 Increase engagement in lives of the young people in their care |
$147,804 |
3. Community |
― |
3.1 Improved perceptions of young people |
$313,363 |
4. Justice system |
― |
4.1 Reduction in anti-social behaviour |
$178,735 |
4.2 Decreased number of young people offending |
$143,100 |
4.3 Decreased number of young people in detention |
$2,976,699 |
TOTAL |
$7,818,138 |
All of the outcomes identified as material (relevant) to the stakeholders are also material (significant) based on the total value they create for each of the stakeholder groups and their comparison to other stakeholder groups. Therefore, no outcomes were excluded after completion of the valuation stage of the analysis.
For a detailed description of the valuation of each of the outcomes, please refer to Appendix 7.