Federal agencies accumulate and report costs for a number of reasons, including:
Compliance with GPRA (Government Performance and Results Act), which links budgeting to performance Compliance with the CFO Act, which mandates preparation of auditable financial statements Compliance with SFFAS No. 4 - Managerial Cost Accounting, which requires cost accumulation for decision- making and performance evaluation While accurate cost reporting supports audit quality, achieving an unmodified audit opinion is not the primary reason for accumulating costs - it is an outcome, not a purpose.
Relevant References:
FASAB SFFAS No. 4 - Managerial Cost Accounting
CFO Act of 1990
GPRA Modernization Act of 2010
C). achieve an unmodified audit opinion

The formal financial statements of a state or local government include:
Basic Financial Statements (government-wide and fund statements)
Notes to the Financial Statements
Required Supplementary Information (RSI), including MD&A and pension data The auditor's letter (i.e., Independent Auditor's Report) is included in the financial section of the ACFR but is not technically part of the financial statements themselves. It is a separate document providing the auditor's opinion.
Relevant References:
GASB Statement No. 34
GFOA ACFR Reporting Guide
AICPA Governmental Audit Guide
D). auditor's letter

According to GASB Statement No. 96 (Subscription-Based Information Technology Arrangements or SBITAs), a subscription agreement is considered "short-term" if the maximum possible term (including renewal options) is 12 months or less.
Short-term SBITAs are not reported as subscription liabilities and are accounted for as outflows (expenses or expenditures) when incurred.
Relevant References:
GASB Statement No. 96 - SBITAs (Issued May 2020)
GASB Implementation Guide No. 2021-1 - Q&A on SBITAs
GFOA Advisory - Cloud Computing and Subscription Agreements
B). 12 months

A revolving fund is a fund established to finance a continuing cycle of operations where the receipts (e.g., fees or reimbursements) are used to finance future operations. These funds are usually self-sustaining and are designed to recover full costs of providing goods or services.
The described situation - an agency providing procurement services to other agencies and using collected fees to continue operations - is a classic example of an intragovernmental revolving fund (also called a working capital fund).
Relevant References:
OMB Circular A-11, Section 20 - Fund Classifications
GAO Glossary of Terms - Revolving Fund
FASAB SFFAS No. 7 - Revenue and Other Financing Sources
A). revolving fund

In the governmental fund (such as the debt service fund), modified accrual accounting is used. Under this basis:
Payment of principal and interest is recorded as expenditures, not reductions of liabilities or interest expense.
No long-term liabilities (e.g., bonds payable) are recorded in governmental funds.
So, the correct journal entry is:
Debit: Expenditures - Principal
Debit: Expenditures - Interest
Credit: Cash
Relevant References:
GASB Codification Section 1300 - Fund Accounting and Modified Accrual Basis GASB Statement No. 34 - Fund-Level Reporting GFOA Accounting and Reporting for Debt Service Funds A). expenditures - principal and expenditures - interest