State and local governments adopt legally binding budgets and are required to monitor compliance with those budgets. Budget-to-actual comparisons help ensure that public funds are spent only as authorized by the legislative body. This supports the core accountability principle of public sector financial reporting.
While budgets can also support planning and cash flow, the primary purpose of tracking budgeted vs. actual expenditures is legal compliance.
Relevant References:
GASB Statement No. 34 - Budgetary Comparison Schedules
GFOA - Budget Monitoring and Compliance
GAO Red Book - Legal Requirements for Public Spending
D). spending conforms to legal requirements.

In the reconciliation from the governmental fund financial statements to the government-wide Statement of Activities, capital outlays that were treated as expenditures in the governmental funds are added back. This is because the government-wide financial statements use full accrual accounting, where capital outlays are capitalized as assets and not expensed.
Thus, the $2 million in capital outlays would be added back to adjust net change in fund balances to arrive at the change in net position for governmental activities.
Relevant References:
GASB Statement No. 34 - Reporting Capital Assets and Reconciliation
GASB Codification Section 2200 - Government-wide Financial Reporting
GFOA Annual Comprehensive Financial Report Guidance
C). $2 million in capital outlays is added

Comprehensive Detailed Explanation:
In governmental funds (using the modified accrual basis), expenditures are recorded when financial resources are used - typically when cash is disbursed. However, in government-wide statements (accrual basis), only the portion of the asset's cost consumed in the period is recorded as an expense (i.e., depreciation).
Paying for capital assets such as vehicles is an expenditure in the governmental funds, but not an expense in the accrual-based government-wide financials. Instead, the cost is capitalized and depreciated over time.
Relevant References:
GASB Statement No. 34 - Government-wide vs. Fund Financial Reporting
GASB Codification Section 1300 - Modified Accrual Accounting
GFOA Best Practices - Capital Asset Reporting
C). At the end of the fiscal year, the government pays for ten vehicles which will be depreciated over five years.

When full costs cannot be directly traced to a product or service, indirect costs must be allocated using a rational and systematic basis. The preferred method is to use a cause-and-effect relationship between the resource consumed and the output generated. This aligns with cost accounting principles under FASAB SFFAS No. 4 and managerial accounting frameworks.
Other options, such as direct labor or opportunity cost approaches, may be helpful in specific settings but do not meet the standard requirement for full cost allocation.
Relevant References:
FASAB SFFAS No. 4 - Managerial Cost Accounting Standards
OMB Circular A-136 - Full Cost Accounting
GAO Cost Estimating and Assessment Guide
D). a cause-and-effect relationship between resource costs and outputs

Serial bonds mature in installments over the life of the bond (e.g., every year or every few years). This structure allows the cost of repaying the debt to align more closely with the periods in which the capital asset is used - achieving intergenerational equity by spreading the cost over the same span as the asset's useful life.
Term bonds, zero-coupon bonds, and pay-as-you-go do not align costs with benefits across multiple years in the same way.
Relevant References:
GFOA Best Practices - Debt Management and Capital Planning
GASB Concepts Statement No. 1 - Interperiod Equity
MSRB Educational Materials on Bond Types
A). 30-year serial bonds