## CARO 2020 — Clause ix(d): Short-term Funds for Long-term Purposes
### The Reporting Requirement
Under Clause (ix)(d) of Paragraph 3 of CARO 2020, the statutory auditor must report:
> Whether funds raised on a short-term basis have been utilised for long-term purposes, if yes, the nature and amount to be indicated.
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### Why This Matters
Using short-term borrowed funds (e.g., working capital loans, cash credit) for long-term asset creation creates a maturity mismatch — the company may face liquidity stress when the short-term facility must be repaid but the long-term asset has not yet generated returns. CARO requires disclosure to alert financial statement readers to this risk.
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### Identifying Short-term vs Long-term
| Typically Short-term | Typically Long-term |
|---|---|
| Cash credit facilities | Capital expenditure (plant, machinery, buildings) |
| Working capital loans | Long-term investments |
| Overdraft facilities | Infrastructure/ETP installation |
| Short-term commercial paper | R&D assets |
Key rule: Cash credit facilities for working capital are by their very nature short-term borrowings — even if the credit line itself is renewed annually.