This sentence basically means that an explanation to the problem was the costs of prisons and the recession in the U.S during the times of December 2007 through June 2009.
I believe that you are correct that D is the right answer.
The correct answer would be the first option. A collective subject is a noun (functioning as the subject) that describes a group made of many parts. For example, the words "team" which means a group of people playing. Another one is "pack" used in a pack of wolves, which means a group of wolves.
D is the answer you are looking for in thins case because it is a business letter