It has been widely recognized that constantly increasing community fund is one of the indicators of successful implementation of community forestry programme in Nepal. However, a very few people know how the fund is collected under the programme and it has been utilised so far. The paper is based on the generation and utilisation of community fund of two-community forests in the Terai region. The community forests of the region have collected large amount of community fund annually from the sale of forest products and non-forestry sources as well. The study revealed that along with community fund increasing, office operation cost has been constantly increasing while utilising the fund, whereas promotion of forest management and community development costs are essential for long-term sustainability of the programme. Therefore, the study concluded that only the minimisation of office operation cost could increase the forest management and community development costs based on the principle of trade-off, which is crucial to keep the people intact in community forestry programme and its long-term sustainability.
