If you run a public finance consulting firm, it is crucial to understand some of the most common mistakes committed in the industry. Some tempting financial schemes can end up weakening the fiscal future of a government when practised. Although most of these consequences are not lethal, those that commit them find that they only manage to dig deeper financial holes.

Ignoring the long-term consequences of deals

Very few governments make long-term financial plans. Many of them don’t even need a fiscal analysis of the proposed legislation. This has made it possible for some governments facing immediate demands for increases in wages to buy off employee constituencies through increasing the retirement benefits at costs that are unsustainable. Other governments get wooed by the prospect of asset privatization as a way to get quick money. Any experienced public finance consulting firm CA will advise against this mistake.

Taking on too much

Privatization of assets has become alluring to governments because most of them have been burned by taking a lot of public investments than they can handle. This involves developing projects that are funded by municipal bonds. If the tax revenues of a project don’t deliver, governments are forced to pay the difference to holders of bonds out of the general fund budgets. This promise can become an embarrassing burden for some.

Shortchanging pension obligations

A chronic unwillingness by lawmakers to make necessary contributions to fund plans is the most serious threat that some government pension plans face. A lot of governments pared down or skipped payments into pension plans at the time of recession for them to be sure. However, some places did that for years before the downturn and still do it today. The longer they take, the larger the liability becomes. It is therefore crucial for governments to hire the right public finance consulting firm to help in dealing with these challenges.