Examine the CAFR. Utilizing the comprehensive annual financial report (CAFR) obtained for Exercise 1—16, follow theinstructions below. a. General Long-term Liabilities.(1) Disclosure of Long-term Debt. Does the report contain evidence that the government has general long-term liabilities?If so, does the report include a list of outstanding tax-supported debt issues: capital lease obligations; claims. judgments. and compensated absence payments to be made in future years: and unfunded pension obligations?Has the government issued any special assessment debt? If the government is obligated in some manner, is the debtreported as a liability in the government-wide statement of net position? If the government has issued special assessmentdebt for which it is not obligated in any manner, do the notes discuss this debt?Refer to the enterprise funds statement of net position as well as note disclosures for long-term liabilities. Are anyenterprise debt issues backed by the full faith and credit of the general government? If so, how are the primary liabilityand the contingent liability disclosed?(2] Changes in Long-term Liabilities. How are changes in long-term liabilities during the year disclosed? Is there adisclosure schedule for longterm liabilities similar to Illustration 6—1? If any new debt was issued by a governmental fund, are the proceeds of the debt issuance reported in the governmental fund financial statements as an "other financingsource"?Are interest payments and principal payments due in future years disclosed? If so, does the report relate these futurepayments with resources to be made available under existing debt service laws and covenants?(3) Debt Limitations. Does the report contain information as to legal debt limit and legal debt margin? If so, is theinformation contained in the report explained in enough detail, so that an intelligent reader (you) can understand how thelimit is set, what debt is subject to it. and how much debt the government might legally issue in the year following the dateof the report?(4) Overlapping Debt. Does the report disclose direct debt and overlapping debt of the reporting entitY? What disclosuresof debt of the primary government are made in distinction to debt of component units? Is debt of component unitsreported as "direct" debt of the reporting entity or as "overlapping debt"?b. Debt Service Funds. (1) Debt Service Function. How is the debt service function for tax supported debt handled—by the General Fund, by aspecial revenue fund, or by one or more debt service funds? If there is more than one debt service fund, what kinds ofbond issues or other debt instruments are serviced by each fund? Is debt service for bonds to be retired from enterpriserevenues reported by enterprise funds?(2) Investment Activity. Does the CAFR contain a schedule or list of investments of debt service funds? Does the reportdisclose increases or decreases in the fair value of investments realized during the year? Does the report disclose netearnings on investments during the year? What percentage of revenue of each debt service fund is derived from earningson investments? What percentage of the revenue of each debt service fund is derived from taxes levied directly for thedebt service fund? What percentage is derived from transfers from other funds? List any other sources of debt servicerevenue and other financing sources. and indicate the relative importance of each source.(3) Capital Lease Payments. If general capital assets are being acquired under capital lease agreements. are periodic leasepayments accounted for as expenditures of a debt service fund (or by another governmental fund)? If so, does the reportdisclose the portion of capital lease payments considered as interest and the portion considered as payment on theprincipal?