CoC & ESG Budget & Financial Management

CoC Grant Amounts and Project-Based Budgeting

CoC grants are project-based, meaning each funded project has its own budget determined by the services, housing, and operations it provides. Grant amounts vary widely — a small SSO project might receive $50,000 per year, while a large PSH project with rental assistance could exceed $1 million annually. There is no fixed formula for CoC project amounts; the budget must be justified by the project's design, capacity, and cost reasonableness.

For renewal projects, the grant amount is based on the Annual Renewal Amount (ARA) — the amount HUD has approved for the project in the current grant term. Renewals can request up to the ARA; requesting more requires justification and is subject to the CoC's review. For new projects, the budget is proposed by the applicant and evaluated for reasonableness by the CoC and HUD.

Eligible Cost Categories

Under 24 CFR 578, CoC funds may be used for the following cost categories, depending on component type:

Critical note: A project cannot combine leasing and rental assistance in the same grant. If your project leases units from landlords, you use leasing costs. If participants hold their own leases and you provide rental payments to landlords, you use rental assistance. This distinction affects match requirements, HQS inspection responsibilities, and participant rights.

Match Requirements

Match is one of the most important and most frequently problematic aspects of CoC and ESG financial management. The match requirements differ significantly between the two programs.

CoC Match: 25%

CoC grants require a 25% match for all costs except leasing. This means for every $3 in CoC funds spent on eligible costs (other than leasing), the recipient must provide $1 in matching funds. Leasing costs are exempt from the match requirement entirely.

• Cash match: Funds from non-CoC sources, including other federal programs (where permitted by the other program's rules), state and local government funds, private foundations, and organizational operating funds
• In-kind match: Donated services (at fair market value), donated real property, donated supplies, and volunteer time (at rates established by the Independent Sector or local prevailing wage)
• Federal match sources: Some federal programs allow their funds to be used as match for other federal grants. Medicaid, TANF, and some HHS programs may be allowable match sources for CoC, but you must verify with both programs

ESG Match: 100% Dollar-for-Dollar

ESG requires a dollar-for-dollar match, meaning the ESG recipient must match every dollar of ESG funds with a dollar from other sources. For state ESG recipients, the match requirement passes to subrecipients. This is one of the highest match requirements in federal grant programs.

The ESG match can come from the same sources as CoC match, plus:

• Shelter operating costs funded by state or local government
• Value of donated buildings or leases for shelter or service delivery
• Salary and benefits of staff working on ESG activities funded by other sources
• Volunteer hours valued at rates consistent with 2 CFR 200 standards

ESG Allocation Formula and Expenditure Limits

ESG allocations are based on the CDBG formula, which considers poverty, housing overcrowding, population, housing age, and growth lag. ESG recipients must comply with expenditure limits:

• Emergency shelter and street outreach cap: No more than 60% of the ESG allocation may be spent on emergency shelter and street outreach activities combined. The remaining 40% or more must be spent on homelessness prevention, rapid re-housing, HMIS, and administration.
• Administrative cap: No more than 7.5% of the ESG allocation may be spent on administrative costs by the recipient. Subrecipient admin costs are separate.

Renewal Funding and Annual Renewal Demand

The Annual Renewal Demand (ARD) is the total amount needed to renew all existing CoC grants in a given CoC. The ARD determines the Tier 1 funding line in the CoC competition — projects within the ARD are in Tier 1 and are highly likely to be funded. Understanding the ARD is essential for budget planning:

• Renewal amounts: Each project's renewal amount is calculated based on its current grant agreement. Projects cannot request more than their Annual Renewal Amount (ARA) without justification.
• Grant term: CoC grants typically have a one-year operating period but are renewed annually through the competition. Renewal is not automatic — it depends on performance and the CoC's ranking decisions.
• Budget period: The budget period aligns with the grant term. CoC recipients must expend funds within the budget period. Unspent funds may be recaptured by HUD or reduce future renewal amounts.

Projects that consistently underspend their budgets send a signal that the grant amount exceeds actual need. This can result in reduced renewal amounts and creates an opportunity for the CoC to reallocate the difference to new projects. Monitor your expenditure rate and communicate with your HUD field office if you anticipate significant underspending.

Cost Effectiveness Requirements

HUD evaluates CoC projects on cost effectiveness — the cost per participant or per housing unit relative to outcomes achieved. Cost effectiveness is considered in both the CoC Application scoring and the local competition ranking. Key considerations:

• Cost per permanent housing exit: How much does it cost your project to successfully place one person or family into permanent housing? Lower cost per exit (while maintaining quality outcomes) demonstrates efficiency.
• Comparison to Fair Market Rent: For rental assistance and leasing projects, HUD compares your per-unit costs to the Fair Market Rent (FMR) for the area. Costs significantly above FMR require justification.
• Administrative cost ratio: Admin costs are capped at 10% of the total CoC grant. Projects consistently at the maximum may be flagged for higher administrative burden relative to service delivery.

Leveraging and Project Quality Scoring

In the CoC competition, HUD awards points for leveraging — the degree to which the CoC and its projects attract non-CoC resources to support the homeless response system. Projects that bring additional funding beyond the minimum match strengthen both their own competitive position and the CoC's overall score.

• Committed leveraging: Documented financial commitments from non-CoC sources. Commitment letters should specify the amount, purpose, and duration of the commitment.
• Healthcare leveraging: HUD has specifically highlighted healthcare resources (Medicaid, FQHC partnerships, behavioral health funding) as a priority leveraging area. Projects that demonstrate healthcare integration score higher.
• System-level leveraging: Beyond individual projects, the CoC Application reports on system-wide leveraging from mainstream resources (public housing, Section 8, workforce development, public benefits) that support people exiting homelessness.

Financial Management Under 2 CFR 200

All CoC and ESG expenditures must comply with the 2 CFR 200 cost principles, procurement standards, and administrative requirements. Key financial management considerations include:

• Cost allocation: If staff or facilities serve multiple programs, costs must be allocated using a reasonable and documented methodology. Time and effort records are essential for personnel costs shared across grants.
• Procurement: Purchases above the micro-purchase threshold ($10,000 for most organizations) require competitive procurement. Equipment purchases require prior HUD approval.
• Indirect costs: Organizations may charge indirect costs using a federally negotiated rate or the 10% de minimis rate under 2 CFR 200.414(f). Indirect costs count within the 10% admin cap.
• Single Audit: Organizations expending $750,000+ in federal awards must complete a Single Audit. CoC and ESG expenditures count toward this threshold.

Budget Management Best Practices

• Track expenditures monthly: Compare actual spending to the budget timeline. For a 12-month grant, you should be roughly 25% expended at month 3, 50% at month 6, etc. Significant deviations require investigation.
• Document match continuously: Do not wait until the end of the grant year to compile match documentation. Track match contributions monthly. Insufficient match is one of the most common audit findings. See the Common Mistakes guide for match documentation pitfalls.
• Request budget modifications early: If program needs change and you need to move funds between cost categories, contact your HUD field office before making the change. Budget modifications may require HUD approval depending on the amount and nature of the change.
• Maintain separate accounting: Track CoC and ESG funds separately in your accounting system. Do not commingle homeless assistance funds with other program funds in a way that makes individual transactions untraceable.