If the performance bond on a city public-works project turns out to be fraudulent and the contractor still wants to be paid, can the city release final payment without the surety's written consent?
Plain-English summary
The City of Laurel hired a contractor to do a drainage repair project. The contractor furnished what was supposed to be a performance bond. Late in the job, the City discovered the bond was a fake. The work itself was completed satisfactorily, and the contractor wanted final payment. Section 31-5-25(1)(b)(iv) says final payment cannot be issued without the written consent of the contractor's surety. There is no surety here. So can the City pay anyway?
The Attorney General said no. The plain language of the statute prohibits final payment without surety consent. The absence of a surety (because the bond was fraudulent) does not let the City work around the requirement. Two collateral points the AG made:
- Section 21-39-15 makes it a misdemeanor for a member of a municipal governing body to "knowingly vote for the payment of any claim not authorized by law." Conviction can mean a fine up to double the amount of the unlawful claim, up to three months in jail, or both.
- The AG referred Laurel to the Office of State Auditor's Technical Division, since the underlying facts suggest fraud upon the State.
The AG limited the opinion to the prospective question of final payment. It expressly did not address whether earlier progress payments the City had already made were lawful.
What this means for you
If you are a municipal attorney or finance officer staring at a fraudulent or non-existent bond
You cannot release final payment. Section 31-5-25(1)(b)(iv) is unambiguous, and the AG has read it strictly: no surety consent, no final payment. That holds even if the work is done and the contractor is demanding payment.
What you can do:
- Refer the matter to the Office of State Auditor's Technical Division. The AG explicitly recommended this in the opinion. Fraud on a public-works bond is exactly the kind of matter the State Auditor handles.
- Look into prosecution and recovery. A fraudulent bond is a crime. The contractor and any individual who knowingly submitted the fake bond are exposed.
- Document everything. When you say no to final payment, do it in writing on the minutes, citing this opinion and Section 31-5-25.
If you are on a Mississippi city council or board of aldermen
Do not vote yes on final payment in this situation. Section 21-39-15 puts personal criminal liability on the table. A misdemeanor conviction with a fine up to double the unlawful claim plus up to three months in jail is real exposure. Ask your city attorney to confirm the surety status before you vote on any final-payment claim.
If you are a public-works contractor in Mississippi
Two things to know:
- Your bond has to be real. The statute requires "the usual bond with good and sufficient sureties." If the surety turns out not to exist, you will not get final payment, even if the work is done. That is not a technicality the city can waive.
- Verify your bonding company before submitting the bond. There have been cases of fraudulent bonding agencies issuing fake bonds; if you trusted a broker who used a sham surety, your money is on the line and your relationship with the city is ruined.
If you have already made progress payments on a project where the bond turns out to be fake
The AG explicitly declined to opine on past payments, so this opinion does not say those were unlawful. But it also does not bless them. Get separate advice (and probably loop in the State Auditor's Technical Division) on whether and how to address those payments. The criminal-liability provision in Section 21-39-15 looks at whether the vote was "knowingly" for an unauthorized claim, which requires intent at the time of the payment.
If you are a state auditor or auditor's technical-division staff
This opinion gives you a hook. The AG specifically referred a fraud-on-bond situation to your office. Other municipalities likely face similar fact patterns. Section 31-5-25(1)(b)(iv) is now backed by an explicit AG opinion saying the surety-consent requirement is jurisdictional, not waivable.
Common questions
Q: Can a Mississippi city pay a contractor in full if the performance bond turns out to be fake?
A: No. Section 31-5-25(1)(b)(iv) prohibits final payment without the contractor's surety providing written consent. If there is no surety, there is no consent, and no final payment.
Q: What if the project is finished and the work is good?
A: Doesn't matter. The statute is unconditional. The AG held that the absence of a surety does not "permit the City to circumvent Section 31-5-25 and pay the contractor anyway."
Q: What is the personal liability for a council member who votes yes anyway?
A: Section 21-39-15 makes it a misdemeanor. Penalty: up to double the amount of the unlawful payment as a fine, or up to three months in county jail, or both.
Q: Can the city sue the contractor for the fraudulent bond?
A: That is outside the scope of this opinion. The AG referred Laurel to the Office of State Auditor's Technical Division. Civil and criminal remedies against the contractor and the entity that issued the fake bond would be analyzed by separate counsel.
Q: What about progress payments the city already made?
A: The AG limited this opinion to the prospective question of final payment. It did not address earlier payments. Whether earlier payments were lawful is fact-specific (did the city know? should it have known? was there a duty to verify?). Get separate legal advice and engage the State Auditor.
Q: What does "the usual bond with good and sufficient sureties" mean under Section 31-5-3?
A: The statute requires public-works contractors who enter formal contracts with the state, a county, or a municipality to post a bond before commencing work, with sureties that are real and capable of paying out if the contractor defaults. A fake or insolvent surety does not satisfy this requirement.
Background and statutory framework
Mississippi public-works contracting runs on a bond system designed to protect the public fisc and downstream subcontractors. The two key statutes are Section 31-5-3 (requirement that the contractor post a bond before starting work) and Section 31-5-25 (the procedural framework for payments, retainage, and surety consent).
Section 31-5-25(1)(b)(iv) is short and absolute: "In no event shall said final payment due the contractor be made until the consent of the contractor's surety has been obtained in writing and delivered to the proper contracting authority." The AG's office has interpreted this strictly for decades. The 1994 Thompson opinion, cited here, said the same thing.
Section 21-39-15 is the criminal backstop. It does not require knowledge that the claim was unauthorized in some general sense; it requires that the council member "knowingly vote for the payment of any claim not authorized by law." Once an AG opinion has put a municipal official on notice that final payment is unlawful here, voting yes anyway is hard to defend as not "knowing."
The State Auditor's Technical Division handles allegations of waste, fraud, and abuse in the expenditure of public funds. The AG routinely refers matters there when the question presented suggests potential fraud, as it did here.
Citations and references
Statutes:
- Miss. Code Ann. § 31-5-3 (performance bond required for public works)
- Miss. Code Ann. § 31-5-25(1)(b)(iv) (surety consent required for final payment)
- Miss. Code Ann. § 21-39-15 (criminal liability for unauthorized municipal payments)
Prior AG opinion cited:
- MS AG Op., Thompson (Mar. 3, 1994): Surety written consent required before final payment.
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2025/10/B.-Robinson-October-24-2025-Mississippi-Code-Annotated-Section-31-5-25.pdf
Original opinion text
October 24, 2025
Brett Robinson, Esq.
Attorney, City of Laurel
414 West Oak Street
Laurel, Mississippi 39440
Re: Mississippi Code Annotated Section 31-5-25
Dear Mr. Robinson:
The Office of the Attorney General has received your request for an official opinion.
Background
The City of Laurel ("City") entered into a contract with a company for work on a drainage repair project. Shortly before final completion of the project, the City discovered that the legally and contractually required performance bond submitted to the City was, in fact, fraudulent. The subject project has been completed to the satisfaction of the City, but there is no performance bond on the project. The contractor has submitted a request for final payment.
Question Presented
May the City of Laurel pay the contractor the final payment under the contract without obtaining the written consent of a surety, since no such surety exists?
Brief Response
No. Mississippi Code Annotated Section 31-5-3 requires "the usual bond with good and sufficient sureties" for municipal public works contracts, and Section 31-5-25(1)(b)(iv) prohibits final payment absent the written consent of an existing surety.
Applicable Law and Discussion
Section 31-5-3 states, in relevant part, as follows:
Any person, firm or corporation entering into a formal contract with this state, any county thereof, municipality therein, or any public board, department, commission, or political subdivision of this state, for the construction or maintenance of public buildings, works or projects or the doing of repairs to any public building, works or projects shall be required before commencing same to execute the usual bond with good and sufficient sureties, as required by law. . . .
(emphasis added). Public works contractors for a municipality must submit "the usual bond with good and sufficient sureties."
Further, Section 31-5-25(1)(b)(iv) provides as follows:
In no event shall said final payment due the contractor be made until the consent of the contractor's surety has been obtained in writing and delivered to the proper contracting authority.
(emphasis added).
It is the opinion of this office that the plain language of the above-cited statute prohibits the City from paying the contractor the final payment in the absence of the written consent of an existing surety. The fact that such surety does not exist does not permit the City to circumvent Section 31-5-25 and pay the contractor anyway. See MS AG Op., Thompson at *2 (Mar. 3, 1994) (". . . the consent of the contractor's surety must be obtained in writing prior to the issuance of final payment to the contractor.") (emphasis added).
In addition, Section 21-39-15 provides as follows:
If any member of the governing body of a municipality shall knowingly vote for the payment of any claim not authorized by law, he shall be subject to indictment and, upon conviction, be fined by a sum not exceeding double the amount of such unlawful claim or appropriation, or by imprisonment in the county jail for not more than three months, or by both such fine and imprisonment.
Please note that we are not opining on any previous payments the City may have made to the contractor; this opinion is limited in scope to your question about the final payment.
Finally, because your request deals with the expenditure of public funds under circumstances evidencing a potential fraud upon the State, we also refer you to the Technical Division of the Office of State Auditor.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Caleb A. Pracht
Caleb A. Pracht
Special Assistant Attorney General