Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Economic Research (January 28, 2025)
January 28, 2025 · Department of Economic Research · 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 performance audit of state 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.”
The auditor reviewed whether agencies properly reported monetary settlements to the Comptroller and whether they had rules for using confidentiality language in employee settlements.
“In this performance audit, we determined the following:”
The report says weak oversight can hide workplace problems, misuse taxpayer money, and make it harder for the public to know how government handles employee disputes.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
As a taxpayer and resident, this affects whether public money is being spent transparently and whether state employees are protected from misconduct being hidden.
“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.”
The audit found no documented statewide internal rules for creating, approving, documenting, keeping, or overseeing employee settlement agreements, and no documented rules for confidentiality language.
“Executive offices and agencies do not have documented internal policies or procedures on the authorization, development, documentation, and retention of state employee settlement agreements and supporting records.”
The auditor recommends written policies, centralized oversight, public reporting, better record retention, training, and limits on confidentiality language, including possible executive action.
“The Governor should consider implementing an executive order to limit the use of confidentiality language in employee settlement agreements.”
The report is significant because it frames settlement agreements as a key moment when leaders could spot patterns of abuse, mismanagement, or legal risk, but says the state did not manage that information well.
“These agreements represent an inflection point, where executive management can become aware of practices inside agencies where potential abuse or other inappropriate activity may be occurring.”
A settlement agreement is a written deal to resolve an employee claim or dispute, often without going to court; confidentiality language can restrict what people say about the agreement or the facts behind 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.”
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 consistent policies, employee settlements may not be handled fairly, legally, ethically, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; best practices from Montana Legislative Audit Division’s State Employee Settlements audit. ( 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 to improve transparency and accountability for 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 may be used to obscure harassment, discrimination, unlawful behavior, poor management, or misuse of taxpayer funds.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR’s Settlements and Judgments Policy; Massachusetts Public Records Law guidance; federal and state nondisclosure 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 )
4 recommendations
- GOV should establish and implement policies and procedures regarding confidentiality language and required supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s 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.”"
Why it matters: Failure to report settlement agreements violates regulation and policy and may cause improper accounting and tax reporting.
Standard: Section 5.09 of Title 815 of the Code of Massachusetts Regulations and CTR’s Settlements and Judgments Policy. ( 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: "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, creating risk that public spending was obscured.
Standard: Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the Massachusetts 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
- GOV should ensure compliance with public records law and develop procedures to retain and provide state employee settlement agreements 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: "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, inappropriate behavior may not be identified or addressed to prevent recurrence.
Standard: Massachusetts Statewide Record Retention Schedule E05-02; best practices from Montana Legislative Audit Division’s State Employee Settlements audit. ( 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 classify records accurately and retain them as required.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: "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."