Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Energy Resources (January 28, 2025)
January 28, 2025 · Department of Energy 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
“There exists little more than a haphazard approach to executing settlements, including those containing confidentiality clauses, with an informal, verbal policy that was allegedly promulgated around 2018 regarding non-disclosure language.”
Read the plain-English breakdown
This is a State Auditor performance audit about employee settlement agreements and confidentiality clauses across the Governor's Office, the Comptroller, 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 audit looked at whether agencies properly reported settlement payments to the Comptroller and whether they had rules for using confidentiality or nondisclosure language in employee settlements.
“In this performance audit, we determined the following:”
The report says weak controls can hide misconduct, misuse taxpayer money, and prevent the public from seeing how state employees and public funds are handled.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
As a resident or taxpayer, this matters because the settlements are paid with public money, and the report says the public should be able to see enough information to know how that money is spent.
“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 Auditor found no documented statewide system for creating, approving, tracking, retaining, and publicly reporting these employee settlements, and said records were often missing or not provided.
“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 report recommends formal policies, centralized oversight, public reporting, better recordkeeping, training, and possible executive or legislative action to limit confidentiality clauses.
“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.”
The audit is significant because it says the current system can fail employees at vulnerable moments and can keep the public from learning about serious problems inside state government.
“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 that resolves a claim, such as a workplace dispute, without continuing through a lawsuit or 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.”
4 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 be handled inconsistently and without transparency, and CTR may not have the opportunity to review state employee settlement payments for proper financial reporting.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, known as the Green Book. ( Section 12 of Chapter 11 of the Massachusetts General Laws; 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 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: "In its response, GOV cited policies that existed during the audit period, notably CTR’s Policy on Settlements and Judgments, and the associated regulations at 815 CMR 5.00."
Why it matters: Confidentiality language may conceal harassment, discrimination, or other unlawful behavior, restrict employees who may not know the clauses are unenforceable, and prevent public transparency over taxpayer-funded settlements.
Standard: Boston Globe Newspaper Co. v. Executive Office of Administration and Finance, CTR’s Settlements and Judgments Policy, Massachusetts Public Records Law guidance, and best-practice internal control standards. ( 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
- GOV should establish and implement policies and procedures regarding confidentiality language and supporting documentation.agency: partially agreed
- GOV 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 employees 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: "In its response, GOV cited a statement within the CTR Settlements and Judgments Policy explaining to departments 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 settlements may cause improper accounting and tax reporting and violates CTR 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.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: "For GOV’s edification, the 40 monetary state employee settlement agreements identified in this finding did meet the definition of a “monetary” settlement according to CTR’s Settlements and Judgments policy."
Why it matters: The missing records prevented testing of CTR reporting compliance and list accuracy and raised concerns about unlawfully withheld information and public transparency.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws. ( E05-01: Employee Complaint/Investigation/Disciplinary Records; E05-02: Employee Grievance/Complaint Records; E05-03: Personnel Action Records )
1 recommendation
- GOV should ensure that state agencies comply with public records law and develop policies and procedures to retain settlement agreements according to the Massachusetts Statewide Record 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: "There were 57 settlement agreements requested during the course of the audit that agencies did not provide upon our request."
Why it matters: Without underlying complaint records, inappropriate behavior may not be identified and corrected, and auditors cannot assess why confidentiality language was included.
Standard: Massachusetts Statewide Record Retention Schedule, including E05-02: Employee Grievance/Complaint Records. ( E05-02: Employee Grievance/Complaint Records; Section 12 of Chapter 11 of the General Laws )
3 recommendations
- GOV should ensure complaints are documented, retained according to the Statewide Records Retention Schedule, and provided to external auditors upon request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records on classification and retention requirements.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: "Our office was not provided with documentation or evidence that demonstrated whether appropriate steps were taken by executive offices and agencies regarding the destruction of public records."