The first US first social impact bond (SIB), which featured Goldman Sachs as an investor and which was designed to cut recidivism rates among adolescent inmates at New York prison Rikers Island, has failed to meet its target and is being discontinued.
Launched in 2012 by the administration of then New York Mayor Michael Bloomberg, the SIB sought to reduce recidivism rates among 16- to 18-year-old inmates by at least 10%. Goldman was the bond’s sole investor, putting up $7.2m (€6.5m), though a foundation created by Bloomberg guaranteed $6m of Goldman’s investment.
The move was confirmed in an article posted last night (July 2) by Goldman Sachs Vice President Andrea Phillips and James Anderson, an official at Bloomberg Philanthropies. Writing on the Huffington Post, Phillips and Anderson said the program, “an evidence-based cognitive behavioural therapy that’s been effective in reducing recidivism in many other correctional settings, did not work at Rikers Island.”
As a result, the current administration of New York Mayor Bill de Blasio has decided to discontinue the program. Goldman is set to lose $1.2m of its original investment in the SIB.
The responsibility for implementing the program was given to the MDRC, a social policy research organisation also based in New York. Another NGO called VERA –Institute of Justice was brought in to determine whether the recidivism rates would drop.
VERA’s finding, which was also published yesterday, said: “The program did not lead to reductions in recidivism for participants. The change in recidivism for the eligible 16- to 18-year-olds, adjusted for external factors, was not statistically significant when compared to the matched historical comparison group.”
“The program did not lead to reductions in recidivism.”
In their article, Phillips and Anderson attempted to put a positive spin on the development. They wrote: “First, New Yorkers didn’t spend a penny on the program. The beauty of social impact bonds is that they allow the government to avoid paying for programs that don’t work.”
They added: “Second, the social impact bond was structured to maximise the ability of government, investors and non-profit service providers to understand what was and wasn’t working.”
The Rikers Island SIB is the second time in almost a year that such a financing instrument has failed. In August 2014, the UK government announced that it was discontinuing the SIB program for inmates at Peterborough prison.