Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Career Services (January 28, 2025)
January 28, 2025 · Department of Career Services · 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 performance audit of employee settlement agreements and confidentiality clauses used by the Governor’s Office, many 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.”
The auditor looked at whether agencies properly reported money settlements to the Comptroller and whether they had rules for confidentiality language in these agreements.
“In this performance audit, we determined the following:”
These agreements use public money and may involve serious workplace problems, so poor tracking and secrecy can hide misconduct, waste money, and reduce public trust.
“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 tracked, whether government workers are treated fairly, and whether officials can hide repeated workplace problems.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The audit found no documented statewide system for making, storing, reporting, or overseeing these settlements, and agencies failed to provide many records the auditor requested.
“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, central oversight, better public reporting, stronger record retention, and limits on confidentiality language; the Governor’s Office said it would take some steps.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report is significant because it says the state lacked basic controls over more than 2,000 reported employee settlements costing over $40 million, while some records were missing or unavailable.
“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 state employee settlement is an agreement resolving a claim by a current or former state worker; a confidentiality clause is language that can limit what someone says about the agreement; CTR is the Comptroller, which reviews certain payments and accounting.
“For the sake of consistency in the audit, we defined a state employee settlement as a settlement resulting from a formal claim3 (union and non-union grievances, complaint, or lawsuit) against a state agency brought by a current or former employee.”
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, settlement agreements may be handled inconsistently, unfairly, or without transparency, and financial reporting errors may occur.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government ( 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 to ensure that policies and procedures are adhered to and to provide reporting to the public regarding the use of these agreements.agency: agreed
- GOV should establish a public reporting process to ensure sufficient transparency and accountability for the use of 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 obscure harassment, discrimination, unlawful behavior, poor management, or misuse of taxpayer funds.
Standard: Public Records Law; CTR’s Settlements and Judgments Policy; 2013 Superior Court decision in Globe Newspaper Co. v. Executive Office of Administration and Finance ( 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 the required supporting documentation justifying its inclusion.
- GOV’s policy on the use of confidentiality language in an employee settlement agreement should weigh the employee’s right to privacy versus the public’s right to know how state funds are spent.
- GOV’s policy on the use of confidentiality language in a settlement agreement should not protect an employee with detrimental behavior (e.g., harassment or abuse) in the workplace.
- The Governor should consider implementing an executive order to limit the use of confidentiality language in employee settlement agreements.
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 strongly recommend GOV revisit recommendation 4 and commit to taking stronger steps to help ensure accountability."
Why it matters: Unreported settlements may violate regulation and policy and create improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy ( CTR’s Settlements and Judgments Policy )
3 recommendations
- GOV should establish and implement policies and procedures over the reporting of 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 sufficient monitoring controls to ensure compliance and the appropriate management of this issue.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: Missing settlement records impaired audit testing and raised concerns about withheld information, public trust, transparency, and CTR reporting compliance.
Standard: Massachusetts Statewide Records Retention Schedule ( Massachusetts Statewide Records Retention Schedule E05-01; Massachusetts Statewide Records Retention Schedule E05-02; Massachusetts Statewide Records Retention Schedule E05-03 )
1 recommendation
- GOV should ensure that state agencies comply with public records law and should develop policies and procedures to ensure that state employee settlement agreements are retained in accordance with the Massachusetts Statewide Record Retention Schedule.
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: "We revisited the responses from the agencies that came in late and after our requested timelines and revised the figure, which still shows 47 settlements agreements were not provided to us in order for us to conduct our tests."
Why it matters: Without complaint records, auditors could not assess why confidentiality language was included or whether inappropriate conduct was properly addressed.
Standard: Massachusetts Statewide Record Retention Schedule ( Section 12 of Chapter 11 of the General Laws; Massachusetts Statewide Record Retention Schedule E05-02 )
3 recommendations
- GOV should develop policies and procedures to ensure that complaints are first documented and then retained in accordance with the Massachusetts Statewide Records Retention Schedule and are provided to external auditors upon their request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to ensure that they accurately classify these records and should then ensure that they retain them according to the requirements of the Massachusetts Statewide Records Retention Schedule.agency: agreed
- If complaints arise out of substantiated egregious behavior, such as illegal or harmful acts, these records should be retained permanently to ensure that this behavior can be tracked across state government.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."
More audits of this entity
Other Office of the State Auditor reports on Department of Career Services .
- Audit of the Department of Career ServicesState Agency / Office · September 26, 2018