A chart detailing cost savings and revenue generation from Working Smarter projects
Core Funds

The University’s “core funds,” comprised of State General Funds, UC General Funds,
and student tuition and fee revenue, provide permanent support for the core mission
activities of the University: instruction, research, and public service, as well as the
administrative and support services needed to perform these activities. Totaling
$6.3 billion in 2010-11, these funds represent 29% of UC’s total operations.

Cost Savings

Some projects involve a decision or action that will achieve a University objective,
but at a lower cost than the historical or projected cost. These cost savings are
reflected as the year-over-year difference in expense, i.e., a reduction in expenses
from the previous year to the current year. Because cost savings always represent a
one-year expense difference (not a multi-year expense difference), the savings
typically decline over time as full efficiency is reached. Although cumulative
savings is an interesting data point, cost savings are not cumulative numbers.

Cost Avoidance

Some projects involve an action taken to reduce future costs, such as replacing parts
before they fail and cause damage to other parts. Cost avoidance may incur higher
(or additional) costs in the short run, but the final or life-cycle cost would be
lower. Similar to cost savings, cost avoidance is reflected as a one-year difference
in expense, comparing what the costs would have been with no action versus what the
costs actually were as a result of the action.

Opportunity Cost Avoidance

Every resource (land, money, time, etc.) can be put to alternative uses. By choosing
one of those alternatives, the decision-maker forgoes any benefit that could have
resulted from the other alternatives. Therefore, every decision or action has an
associated opportunity cost. Opportunity cost is the benefit or value that must be
given up in order to acquire or achieve something else. The main difference between
opportunity cost avoidance and plain cost avoidance is that an opportunity cost –
when incurred – is not recorded in accounting books. In other words, the
unsuccessful avoidance of opportunity cost does not have a direct budgetary
effect.

Revenue Generation

Revenue generation is simply the process by which the University markets or sells a
product or service to produce income. The most traditional form of revenue
generation at a college or university is the tuition paid by students in exchange
for the education delivered. However, there are myriad other forms of revenue
generation ranging from patient care, gift support, indirect cost recovery, patent
royalties, vendor incentives, etc. Like the other measures above, revenue generation
is measured as the year-over-year difference in revenues, i.e., the increase in
revenue from the previous year to the current year. Although many forms of revenue
generation are often cited in cumulative terms, such as multi-year fundraising
campaigns, for budgetary purposes, revenue generation is not measured
cumulatively.