Academic references to outcomes theory
Funders or control agencies should only delegate the power to make trade-offs between competing high-level outcomes to parties that they trust will make such trade-offs in a way that the funder or control agency can accept. When funders or control agencies ‘ring-fence’ spending, they’re implicitly acknowledging that they do not trust the party they’re delegating to, to make the appropriate trade-offs (in other words the funder thinks they will spend the money on things it was not intended for).
The high-levels of an outcomes model (a visual model of outcomes and the steps leading to them) often contains boxes which can potentially be traded-off against each other. For instance, in welfare, there might be a box: maximize compliance with eligibility criteria by welfare recipients. However there might be another box at the same level such as: respect welfare recipients legal rights and right to reasonable privacy. Or, in public health, there might be a box: spend an appropriate amount on disease prevention. However in the outcomes model that that the particular health provider is working from, they probably will also have a box: provide sufficient funding for urgent clinical care.
If a funder or control agency thinks that it can trust a program or provider that is funding to make appropriate trade-offs, then it will be relaxed about delegating to it the right to make these trade-off decisions. However if it does not, the funder or control agency will attempt to limit the extent to which the program or provider is able to make such trade-off decisions itself.
Funders or control agencies can reduce the ability of a program or provider to make trade-offs that it does not support in several ways. The first way is that it can insist that funding for particular activities is ring-fenced. This means that the program or provider cannot be spent the funding on any other activity. The program or provider is also usually required to report back to the funder or control agency a show that the funding has been spent on what it was allocated for. Another way of dealing with this situation is for the funder or control agency tto employ an independent monitoring body with a mandate to promote, or protect, the outcome that the funder or control agency fears may be traded-off.
Talking the public health example above, public funding agencies often ring-fence money and insist that it just be spent on public health activity. This is because the demand for funding to be channeled into clinical care is endless because the need is so high. In regard to the second strategy, having independent checking of the extent to which program or provider might be trading-off, this strategy is the basis of the whole auditing, accreditation and licensing industry. Funders or control agencies use this to assure themselves that those they are funding or controlling are not making inappropriate trades-offs (e.g. reducing quality, unprofessional activity to save money etc.). In specific cases, such as the welfare example above, the funder or control agency could set up a committee which has the job of ensuring, and reporting on, whether the program or provider is violating welfare recipients privacy and rights in its efforts to ensure that they meet eligibility criteria.