Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Agricultural Resources (January 28, 2025)
January 28, 2025 · Department of Agricultural Resources · 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
“It is clear from our review of the issues examined in our report that the system in place regarding employee settlements in state government is dysfunctional – at best.”
Read the plain-English breakdown
This is a state audit of employee settlement agreements and confidentiality clauses across the Governor’s Office, the Comptroller, and many executive branch agencies from 2010 through 2022.
“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of state employee settlement agreements.”
The auditor wanted to see whether agencies properly reported monetary employee settlements to the Comptroller and whether agencies had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
The report says weak controls can hide how public employees are treated and how taxpayer money is spent, and can create legal, ethical, and financial risks.
“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, this matters because settlement payments can involve public money, and the report says poor management can put taxpayers at risk and reduce transparency.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The auditor’s main conclusion is that the state needs formal rules, central oversight, better recordkeeping, and more public reporting for employee settlements and confidentiality clauses.
“We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview.”
The Governor’s Office said it would create or update settlement policies, work with the Comptroller on training, and improve reporting and recordkeeping; the auditor also attached proposed executive order and legislation language.
“Your office has committed to taking actions on some of our audit’s recommendations.”
This report is significant because it was the first in a broader audit effort on state employee settlements, covered 75 agencies, and identified major gaps in policy, reporting, and records access.
“This is the first audit report released by the Office of the State Auditor as part of a comprehensive performance audit of state employee settlement agreements.”
A settlement agreement is a written deal to resolve a claim or dispute, often without going to court. Confidentiality language can limit what people say about the settlement. The report says these clauses may not be enforceable when public records law requires disclosure.
“Confidentiality Provisions May be Unenforceable.”
3 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: Without policies and procedures, GOV cannot ensure fair, ethical, legal, consistent, and transparent handling of employee settlements or proper financial reporting.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, cited as best practice ( US Government Accountability Office’s Standards for Internal Control in the Federal Government )
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: "It appears a number of agencies did not understand CTR’s policies or regulations, particularly the obligations to report settlement agreements to CTR, regardless of the funding source."
Why it matters: Confidentiality language may be used to cover up harassment, discrimination, or other unlawful behavior and may prevent transparency about taxpayer-funded settlements.
Standard: Public Records Law guidance, Boston Globe Newspapers case, CTR Settlements and Judgments Policy, and internal control best practices ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; CTR’s Settlements and Judgments Policy; Speak Out Act )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements and required supporting documentation.agency: partially agreed
- GOV’s policy should balance employee privacy rights 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: "We again note here that CTR’s policy and regulations are not enforceable policy by the employer—they do not bind an agency in an executive office to any particular course of action related to settlement agreements."
Why it matters: Failure to report settlement agreements can lead to improper accounting and tax reporting and violates regulation and policy.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09 ( CTR’s Settlements and Judgments Policy )
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: "We note that even when executive offices and agencies pay for a settlement agreement with their own funding, they must still report the agreement to CTR which ensures its proper coding in the state accounting and reporting system."
Why it matters: Missing settlement agreements prevent testing of reporting compliance and create concern that public spending information may be withheld or unsupported.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws ( Massachusetts Statewide Records Retention Schedule E05-01; Massachusetts Statewide Records Retention Schedule E05-02; Massachusetts Statewide Records Retention Schedule E05-03; Section 12 of Chapter 11 of the General Laws )
2 recommendations
- GOV should ensure state agencies comply with public records law and retain settlement agreements according to the Statewide Records Retention Schedule.agency: partially agreed
- GOV should ensure these records are provided to the auditor upon request.agency: partially agreed
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, inappropriate behavior may not be identified and addressed to prevent recurrence.
Standard: Massachusetts Statewide Records 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 on classifying and retaining these records.agency: agreed
- Complaints arising from 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: "What we know for certain is that we did not receive 124 of the 159, or 78% of, requested copies of the original claim, complaint, or grievance."