‘Clerical error’ leads to state's first late bond payment in 100 years

A recent miscommunication between the treasurer’s office and the state of Mississippi’s bond paying agent led to the first late bond payment by the state in at least 100 years.

The late payment came after the state’s payment agent — US Bank — provided a debt payment invoice to the treasurer’s office on June 6, one day after the June 5 due date, said Michelle Williams, Treasurer Lynn Fitch’s chief of staff.

The state paid the bill on June 7, according to a document disclosed to investors. That document described the late payment as a “clerical error.”

Debt on various bond issues is typically paid once a month by the treasurer’s office.

In 2013, Highland Park Furniture company received a Small Enterprise Development grant from bonds issued through the Mississippi Business Finance Corporation. The company paid the loan’s balance earlier than expected resulting in an early calling of the bonds, which ultimately led to the clerical error, Williams said.

“It was an unusual situation because there were no longer any regular payments coming in on this bond,” Williams said. “We took it very seriously. We had a good talk with US Bank and they tightened their procedures. We created some procedures of our own. We’ll have multiple electronic notifications to make sure if US Bank is late giving notice, we’re on the ball. We’ve changed our procedures to make sure their clerical errors aren’t our problem in the future.”

The effect of a single late payment is minimal, multiple officials told Mississippi Today. Credit ratings agencies closely monitor all transactions and economic factors, especially as they concern a state’s debt services. Seemingly menial issues can lead to a downgrade in state credit ratings or outlooks, resulting in a potential loss of millions to a state.

But in their June reports, the three top ratings agencies shrugged off Mississippi’s late payment.

“On June 7th, the state was two days late in making an optional redemption payment as a result of a clerical error by the state and its paying agent,” the Moody’s Investor Services June report said. “We view this as a one-time event. The late payment does not impact the credit quality of State of Mississippi.”

“We do not believe the administrative lapse is reflective of a fundamental weakness in the state’s willingness and ability to pay its financial obligations,” Standard and Poor’s June report said. “State officials represent they have implemented remediation actions to avoid similar administrative errors in the future.”

“Fitch does not view the delayed payment as a credit concern as it reflects a minor administrative issue and does not indicate any diminished state commitment to the program or any fiscal stress,” the Fitch Ratings June report said. “The state has taken action to tighten up its procedures to ensure that this type of error does not recur.”