Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Civil Service Commission (January 28, 2025)
January 28, 2025 · Civil Service Commission · Read the full official report on mass.gov ↗
Published January 28, 2025 Audit covers January 1, 2010 – December 31, 2022 Under Diana DiZoglio · 2023–present
source
“There exists little more than a haphazard approach to executing settlements, including those containing confidentiality clauses, with an informal, verbal policy that was allegedly promulgated around 2018 regarding non-disclosure language.”
Read the plain-English breakdown
This is a State Auditor performance audit of employee settlement agreements and confidentiality clauses used by the Governor’s Office, executive branch agencies, and the Comptroller from 2010 through 2022.
“This audit was conducted on the Office of the Governor (GOV) and its subordinate agencies, as well as the Office of the Comptroller of the Commonwealth (CTR), for the period January 1, 2010 through December 31, 2022.”
Auditors wanted to see whether agencies properly reported employee settlements to the Comptroller and whether they had rules for using confidentiality language in those settlements.
“In this performance audit, we determined the following:”
The report says weak rules and poor records can hide how taxpayer money is spent and make it harder to know whether employees were treated fairly.
“This results in an inconsistent process that is not transparent to the citizens of the Commonwealth regarding how their public employees are treated or how their tax dollars are being spent.”
As a taxpayer and resident, this affects whether public money is being used openly and whether state government is preventing secrecy from covering up workplace misconduct.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The auditor found no documented statewide system strong enough to manage these settlements, track records, limit secrecy clauses, or ensure required reporting.
“The Administration has no apparent standard approach to records retention, no single point of data collection or analysis, and no demonstrable management of agencies’ use of confidentiality agreements.”
The auditor recommends formal policies, better recordkeeping, centralized oversight, public reporting, limits on confidentiality clauses, and possible executive action or legislation.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The audit covered 75 agencies and found more than 2,000 self-reported employee settlement agreements costing over $40.8 million during the audit period.
“Based on state employee settlement agreement lists provided to us by the executive offices and agencies listed in Appendix C, during the period of January 1, 2010 through December 31, 2022, the audited agencies entered into 2,029 state employee settlement agreements with a total cost in excess of $40,839,452.”
A settlement agreement is a written deal to resolve a workplace claim or dispute; confidentiality, nondisclosure, and non-disparagement clauses are terms that can limit what someone may say about it.
“For the purposes of this executive order, the definition of settlement agreement shall mean a written agreement resolving any claim (as defined by 815 CMR 5.02), written or unwritten, by any claimant for damages to compensate an injury or wrong allegedly suffered, directly or a result of the Commonwealth failing to prevent such damages, including but not limited to personal injury, violation of civil rights, breach of contract, failure to comply with contract bidding laws, assault, harassment, discrimination, retaliation, whistle blowing, incorrect or improper personnel determinations regarding pay, promotion or discipline, failure to comply with statutory or constitutional provisions applicable to employment, and eminent domain taking damages, misconduct, including any attorney's fees and interest associated with these claims.”
4 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Did state agencies report monetary state employee settlement agreement claims to CTR in accordance with Section 5.09 of Title 815 of the Code of Massachusetts Regulation (CMR) and CTR’s Settlements and Judgments Policy?
- Did not comply To what extent, if at all, have agencies developed and implemented policies and procedures regarding the use of confidentiality requests, including nondisclosure language, within the context of state employee settlement agreements?
What the Auditor found
Why it matters: The lack of policy created inconsistent, nontransparent handling of employee settlements and increased the risk of financial reporting errors.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, cited as a best practice. ( Section 12 of Chapter 11 of the Massachusetts General Laws )
3 recommendations
- GOV should establish and implement policies and procedures over the authorization, development, documentation, and retention of state employee settlement agreements, and requirements for supporting documentation.agency: agreed
- GOV should provide centralized management and oversight over the use of state employee settlement agreements.agency: agreed
- GOV should establish a public reporting process for transparency and accountability over state employee settlement agreements.agency: agreed
Agency response & Auditor reply
Agency: "The executive department agrees that documenting policy and procedures can help ensure consistent practice across a broad and wide-ranging government."
Auditor: "We note that it will be important that GOV ensure proper monitoring of any policy implemented to address these concerns and ensure agencies comply on an ongoing basis."
Why it matters: Confidentiality language could be used to hide harassment, discrimination, unlawful behavior, or poor management and could restrict employees from speaking about settlements.
Standard: Public Records Law guidance, the 2013 Boston Globe Superior Court decision, CTR’s Settlements and Judgments Policy, and internal control best practices. ( Public Records Law, G.L. c. 4, §. 7, 26 (a) and (c); Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements and supporting documentation.agency: partially agreed
- GOV’s confidentiality policy should weigh employee privacy against the public’s right to know how state funds are spent.agency: partially agreed
- GOV’s policy should not protect an employee with detrimental workplace behavior.agency: partially agreed
- The Governor should consider an executive order limiting confidentiality language in employee settlement agreements.agency: partially agreed
Agency response & Auditor reply
Agency: "The executive department cannot concur with Audit Finding 2 to the extent that it appears to overlook the Comptroller’s Settlement and Judgments Policy which explains that “confidentiality language mandating that a settlement or settlement terms be kept confidential may not be enforceable”; that “[c]onfidentiality provisions will not create protections that do not already exist under the Public Records Law or other statutory bar to disclosure”; and that “the name of a recipient payee of a settlement or judgment payment made from the settlement and judgment account is considered a public record.”"
Auditor: "This demonstrates that GOV agrees that the lack of a documented policy over the use of non-disclosure language exists and should be clarified in a written policy."
Why it matters: Failure to report settlement agreements violated regulation and policy and could result in improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09. ( 815 CMR 5.09 )
3 recommendations
- GOV should establish and implement policies and procedures over reporting state employee settlement agreements to CTR.agency: agreed
- All executive office employees should receive training on these policies and procedures.agency: agreed
- GOV should establish monitoring controls to ensure compliance.agency: agreed
Agency response & Auditor reply
Agency: "We agree that offices and agencies must follow the Comptroller’s reporting requirements, even when the settlement at issue requires no disbursement from the settlements and judgments fund."
Auditor: "Based on its response, GOV plans to take some measures to address our concerns in this area."
Why it matters: The missing records limited testing of CTR reporting compliance and accuracy of settlement lists, increasing the risk that settlement agreements were not properly reported or accounted for.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws. ( Massachusetts Statewide Records Retention Schedule E05-01, E05-02, and E05-03; Section 12 of Chapter 11of the General Laws )
1 recommendation
- GOV should ensure state agencies comply with public records law and develop policies and procedures to retain employee settlement agreements under the Massachusetts Statewide Record Retention Schedule.agency: disagreed
Agency response & Auditor reply
Agency: "We respectfully disagree with the report’s assertion that “57 executed settlement agreements” requested by OSA “were not provided.”"
Auditor: "There were 57 settlement agreements requested during the course of the audit that agencies did not provide upon our request."
Why it matters: Without complaint records, the auditor could not assess why confidentiality language was included or whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Record Retention Schedule E05-02. ( Massachusetts Statewide Record Retention Schedule E05-02; Section 12 of Chapter 11 of the General Laws )
3 recommendations
- GOV should develop policies and procedures to ensure complaints are documented, retained, and provided to external auditors upon request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to accurately classify and retain records.agency: agreed
- Complaints involving substantiated egregious behavior should be retained permanently.agency: agreed
Agency response & Auditor reply
Agency: "Regardless of the numbers, we agree that the report has identified historical record-keeping issues requiring attention."
Auditor: "Based on its response, GOV intends to address our concerns on this matter."
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