Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Fire Services (January 28, 2025)
January 28, 2025 · Department of Fire 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
“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.”
Read the plain-English breakdown
This is a State Auditor performance audit of employee settlement agreements and confidentiality clauses across the Governor's office, the Comptroller, and 73 other executive branch agencies from 2010 through 2022.
“As such, our review of the use of employee settlement agreements was completed at GOV, CTR, and 73 other executive branch agencies for the period January 1, 2010 through December 31, 2022.”
Auditors wanted to see whether agencies properly reported money settlements 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 how public employees are treated, how tax dollars are spent, and whether settlement agreements are being used fairly and legally.
“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 affects whether public money used in employee 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 says the system needs major repair: clearer rules, better reporting, stronger records retention, and limits on confidentiality language.
“We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview.”
The report recommends that the Governor's office create formal settlement policies, central oversight, public reporting, training, and tighter rules on 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 found more than 2,000 employee settlements costing over $40.8 million, including some with confidentiality language, but auditors said missing records limited their ability to verify the full picture.
“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 settlement agreement is a written deal that resolves a claim, complaint, grievance, or lawsuit without continuing the dispute in court or another forum.
“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.”
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: GOV could not ensure employee settlements were handled fairly, ethically, legally, consistently, or transparently, and CTR might not be able to review settlement payments for proper financial reporting.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; Montana Legislative Audit Division best practices. ( 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 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: "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 could be used to conceal harassment, discrimination, unlawful behavior, poor management, or inappropriate conduct, and employees might not know that nondisclosure terms may be unenforceable.
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; Public Records Law guidance. ( 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 supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy should weigh an employee’s 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 behavior such as harassment or abuse.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 violated regulation and policy and could cause improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09. ( 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 settlement reporting policies and procedures.agency: agreed
- GOV should establish monitoring controls to ensure compliance and proper management.agency: agreed
Agency response & Auditor reply
Agency: "OSA identified 40 “monetary” state employee settlement agreements, totaling $104,209, and all paid through agency funds, that were not reported to the Office of the Comptroller in accordance with the Comptroller’s Settlements and Judgments Policy."
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: Missing settlement agreements impaired audit testing, created concern that information was being withheld, reduced transparency over public spending, and increased the risk that settlements were not properly reported to CTR.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws. ( Massachusetts Statewide Records Retention Schedule E05-01; Section 12 of Chapter 11of the General Laws )
1 recommendation
- GOV should ensure state agencies comply with public records law and develop policies and procedures to retain settlement agreements according to the Massachusetts Statewide Records 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: The auditors could not assess the reason for confidentiality language or whether unlawful behavior such as discrimination or harassment was appropriately addressed.
Standard: Massachusetts Statewide Record Retention Schedule E05-02. ( Massachusetts Statewide Record Retention Schedule E05-02 )
3 recommendations
- GOV should develop policies and procedures to document and retain complaints according to the Massachusetts Statewide Records Retention Schedule and provide them to external auditors upon request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to classify and retain these records properly.agency: agreed
- Complaints arising from substantiated egregious behavior should be retained permanently.agency: agreed
Agency response & Auditor reply
Agency: "Audit Finding 5 appears to inadvertently overstate the percentage of employee complaints that should have been retained under the applicable record retention policy but could not be located upon request."
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."
More audits of this entity
Other Office of the State Auditor reports on Department of Fire Services .
- Department of Fire Services-Examination of Annual Internal Control QuestionnaireState Agency / Office · May 20, 2016
- Audit of the Department of Fire Services (DFS)State Agency / Office · May 12, 2020
- Audit of the Department of Fire Services (March 20, 2024)State Agency / Office · March 20, 2024