Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Developmental Services
January 28, 2025 · Department of Developmental 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
“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.”
Read the plain-English breakdown
This is a state audit of employee settlement agreements and confidentiality clauses across the Governor’s office, the Comptroller’s office, and many executive branch agencies 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 looked at whether agencies properly reported monetary employee settlements and whether agencies had rules for using confidentiality or nondisclosure language in those settlements.
“In this performance audit, we determined the following:”
The audit says weak controls can hide workplace problems, misuse taxpayer money, and leave the public unable to see how government employees and public funds are being handled.
“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 come from public money, and the audit says the public needs better visibility into those payments and why they were made.
“During our audit, we identified more than $40.8 million paid by the Commonwealth in employee settlement agreements.”
The audit’s main conclusion is that agencies lacked clear, documented rules for creating, approving, storing, reporting, and using confidentiality language in employee settlements.
“There were no documented policies or procedures on these basic aspects of the state employee settlement process, including the following:”
The auditor recommended formal statewide policies, stronger oversight, public reporting, better records retention, and limits on confidentiality language; the Governor’s office said it would create a public executive department settlement policy and related agency policies.
“The Office of the Governor will issue a public Executive Department Settlement Policy applicable to all executive department offices and agencies.”
The report is significant because auditors found missing records, unreported settlements, and no documented confidentiality policy, making it hard to know how often settlements were used or whether confidentiality clauses protected privacy or hid misconduct.
“Our inability to obtain necessary records, due to so many documents either being withheld or missing – never mind the disorganization and lack of documentation across state agencies – warrants greater concern and urgency from this Administration.”
A settlement agreement is a written deal used to resolve a claim or dispute, often instead of continuing in court or another formal process.
“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.”
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, settlement agreements may not be handled fairly, ethically, legally, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, and CTR requirements for settlement processing and reporting ( 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 adherence to policies and procedures and provide public reporting.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 conceal harassment, discrimination, unlawful behavior, poor management, or inappropriate conduct, while limiting transparency over taxpayer-funded settlements.
Standard: Public Records Law, Boston Globe Newspaper Co. v. Executive Office of Administration and Finance, CTR’s 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; G.L. c. 4, §. 7, 26 (a) and (c); Speak Out Act )
4 recommendations
- GOV should establish and implement policies and procedures regarding confidentiality language and supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy should weigh 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 such as harassment or abuse.agency: partially agreed
- The Governor should consider an executive order limiting confidentiality language in employee settlement agreements and requiring a balancing test.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: "There is no policy, however, prohibiting or permitting them or regulating their use."
Why it matters: Failure to report settlement agreements may cause improper state accounting and tax reporting and violates regulation and policy.
Standard: CTR’s Settlements and Judgments Policy and Section 5.09 of Title 815 of the Code of Massachusetts Regulations ( 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 and appropriate management.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 agreements limited testing of CTR reporting compliance and settlement list accuracy, and created concern that settlement information may be withheld from public view.
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 )
1 recommendation
- GOV should ensure state agencies comply with public records law and develop policies and procedures to retain settlement agreements under the statewide 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: "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 understand why confidentiality language was used or whether inappropriate behavior was properly identified and addressed.
Standard: Massachusetts Statewide Records Retention Schedule E05-02 and Section 12 of Chapter 11 of the General Laws ( 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 the Massachusetts Supervisor of Public Records to classify and retain records correctly.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."
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