Nonprofits Could Get New Financial Incentive in Obama Budget

President Obama’s proposed budget will include money for pilot efforts to offer so-called social-impact bonds that encourage nonprofits to develop programs that get results, reports The New York Times.

The British government and some U.S. city and state administrations are already experimenting with or considering similar efforts, in which foundations and other nonprofit groups initially pay for and oversee new programs.

Under the Obama plan, the federal government would promise to reimburse the nonprofits that create new programs, and possibly give them bonuses, if they meet previously set performance benchmarks.

Governments like this idea because they do not have to pay the bill for unsuccessful programs.

The Rockefeller Foundation and other donors have been working to finance efforts that would help make the social-impact bonds work. One group Rockefeller has supported, Social Finance, has raised a total of $8-million so far.

Social Finance now oversees a project that will give investors their money back if several nonprofit efforts succeed in reducing the number of convicts who return to jail.

Read more: Sean Stannard-Stockton, a Chronicle columnist, argues in a new opinion article that such bonds should become part of how philanthropy redefines it role in the next decade.