Corpus Fund:
Corpus fund is considered as the capital of the organization and is different from the usual donations that the NGOs get for their expenses. The usual donations that an NGO gets, would be treated as income for the NGO and this amount has to be spent by the NGO in the same year, while the corpus fund doesn't have such a limitation. NGOs can invest their Corpus Fund in avenues like Fixed Deposits or Mutual Funds and the NGOs can take the income generated in these avenues for their expenses, without being fully dependent on external donations for their day to day operations.
Need of Corpus Fund:
Corpus funds are also referred to as 'Emergency Fund' which the NGOs can use to sustain themselves during difficult times and consider it as a last resort. Sometimes grant received from donor would be an exact budget required for running the program and some of the regular expenses may not be covered in that budget, for example: administrative expenses, building rent etc. The income generated from corpus fund can be utilized for these regular expenses when the external donations received are not sufficient. Corpus Funds helps the organization to be financially secured.
Ways of getting corpus fund:
There are two ways for getting corpus fund:
Donations: Corpus Fund can be received through donation. But the donor needs to clearly mention that the grant should be corpus in written statement. Without written statement, the amount should not be considered as a corpus fund. In case of a large donation, NGO can go back to the donor and get the written statement that it is for corpus.
Income or Surplus: There are different rules in different countries for this option. In India, only 15% of the organization income can be transferred to the corpus fund as per the Income Tax Act. The remaining 85% income should be spent for the NGO activities within the year.
For example, lets consider a real time situation. If an NGO gets a huge grant during the month of February, but the financial year ends on 31st March. Now, the NGO may not be able to spend 85% of the grant within the financial year. In this case, the NGO can go back to the donor and request to mark the grant amount as corpus. If the donor accepts and mention that in written manner, the grant will be considered as a corpus fund for the NGO.
YouTube explanation about Corpus Fund :