Contracting contracts in municipalities always face financial, administrative and legal risks that can lead to increased costs, project delays and reduced productivity of financial resources. This study was conducted in a library and review format with the aim of investigating the role of financial literacy in reducing the risks of contracting contracts. Data were collected through a systematic review of scientific sources, research articles, books and related organizational reports and examined using qualitative content analysis and comparative analytical methods. The findings show that the financial literacy of municipal managers and experts plays a key role in reducing contract risks through improving budgeting, liquidity management, analyzing contractors' financial strength and using risk hedging tools. Also, increasing financial transparency and data-based decision-making improves project performance and organizational trust. The present study suggests that improving the financial literacy of municipal employees and managers should be considered as a key strategy in managing contracting contracts and reducing related risks.