Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Early Education and Care (January 28, 2025)
January 28, 2025 · Department of Early Education and Care · 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 Auditor performance audit of employee settlement agreements, including whether confidentiality language was used, across the Governor’s Office, the Comptroller, and many executive branch agencies.
“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 audit looked at whether agencies properly reported settlement payments and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
Without clear rules, settlements may be handled unevenly, public money may be harder to track, and workers may not be treated consistently.
“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.”
If you pay Massachusetts taxes, this affects whether public money used in settlements is tracked, reported, and protected from misuse.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The auditor found missing policies, weak recordkeeping, underreporting to the Comptroller, missing settlement records, and missing complaint files.
“Executive offices and agencies did not report 40 state employee settlement agreements to CTR when required.”
The report recommends new written policies, centralized oversight, better public reporting, better record retention, and limits on confidentiality clauses; 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 auditor presents this as the first report in a broader review of state employee settlements, so it may shape future transparency rules and legislation.
“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 deal used to resolve a worker’s claim or dispute without continuing a court, grievance, or complaint process; confidentiality language can limit what people say about it.
“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 and procedures, the Governor’s Office cannot ensure settlements are 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; Montana Legislative Audit Division best-practice recommendation on state employee settlement support documentation and standard language. ( Section 12 of Chapter 11 of the Massachusetts General Laws; Standards for Internal Control in the Federal Government )
3 recommendations
- Establish and implement policies and procedures over authorization, development, documentation, retention, and supporting documentation for state employee settlement agreements.agency: agreed
- Provide centralized management and oversight over state employee settlement agreements.agency: agreed
- Establish public reporting 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 obscure harassment, discrimination, unlawful behavior, poor management, or misuse of taxpayer funds, and employees may not know such terms may be unenforceable.
Standard: Public Records Law principles, the 2013 Boston Globe Superior Court decision, CTR’s Settlements and Judgments Policy, and best practices limiting confidentiality language. ( 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; Speak Out Act )
4 recommendations
- Establish and communicate policies and procedures for confidentiality language and required supporting documentation.agency: partially agreed
- Weigh employee privacy rights against the public’s right to know how state funds are spent.agency: partially agreed
- Ensure confidentiality language does not protect employees with detrimental behavior.agency: partially agreed
- Consider an executive order limiting confidentiality language and implementing 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: "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 settlements violates regulation and policy and may cause improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09. ( CTR’s Settlements and Judgments Policy; Section 5.09 of Title 815 of the Code of Massachusetts Regulations )
3 recommendations
- Establish and implement policies and procedures for reporting state employee settlement agreements to CTR.agency: agreed
- Train all executive office employees on these policies and procedures.agency: agreed
- 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 prevented testing of CTR reporting compliance and settlement list accuracy, increased the risk of undisclosed settlements, and could reduce public trust.
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 )
1 recommendation
- Ensure compliance with public records law and develop policies and procedures to retain and provide settlement agreements; consider a centralized list and storage-location tracking.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, auditors could not assess why confidentiality language was included or whether unlawful behavior was appropriately addressed, creating a risk that inappropriate behavior will not be identified and prevented.
Standard: Massachusetts Statewide Records Retention Schedule E05-02 and best practices for settlement support documentation. ( Massachusetts Statewide Record Retention Schedule E05-02; Section 12 of Chapter 11 of the General Laws )
3 recommendations
- Develop policies and procedures to document, retain, centralize, and provide complaints to external auditors.agency: agreed
- Consult the Massachusetts Supervisor of Public Records to classify and retain records accurately.agency: agreed
- Retain complaints involving substantiated egregious behavior 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."
More audits of this entity
Other Office of the State Auditor reports on Department of Early Education and Care .
- Audit of the Department of Early Education and Care (November 25, 2024)State Agency / Office · November 25, 2024
- Department of Early Education and CareState Agency / Office · November 25, 2014
- Department of Early Education and CareState Agency / Office · May 8, 2012
- Audit of the Department of Early Education and Care (EEC)State Agency / Office · May 5, 2020
- Department of Early Education and CareState Agency / Office · May 12, 2011
- Department of Early Education and CareState Agency / Office · March 27, 2013