Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Labor Relations (January 28, 2025)
January 28, 2025 · Department of Labor Relations · 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, its agencies, and the Comptroller’s office 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 wanted to see whether agencies properly reported monetary employee settlements and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
The report says poor controls can hide how taxpayer money is spent and how public employees are treated.
“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 is used openly and whether state government learns from workplace problems instead of hiding them.
“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 current system is broken and needs stronger written rules, central oversight, better recordkeeping, and more public reporting.
“We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview.”
The report recommends new policies, better oversight, public reporting, training, and possible executive-order or legislative changes to limit confidentiality clauses.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The audit found more than 2,000 self-reported employee settlements costing over $40.8 million, but also said missing records limited 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 used to resolve a claim, often without going to court; confidentiality language can limit what people say about 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.”
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, GOV 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, used as a best practice. ( 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: "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 cover up harassment, discrimination, or other unlawful behaviors and may prevent transparency over taxpayer-funded settlements.
Standard: Public Records Law guidance, the 2013 Boston Globe settlement-agreement public records decision, and CTR’s Settlements and Judgments Policy. ( 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 )
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 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: "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 settlement agreements violates regulation and policy and may cause improper accounting and tax reporting.
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 settlement reporting 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 prevented testing of CTR reporting compliance and settlement-list accuracy, and could obscure how public dollars were spent.
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
- GOV should ensure agencies comply with public records law and develop policies and procedures to retain and provide settlement agreements.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, inappropriate behavior may not be identified or prevented from recurring.
Standard: Massachusetts Statewide Record Retention Schedule E05-02. ( 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 on request.agency: agreed
- Agencies should consult the Massachusetts Supervisor of Public Records to classify and retain these records properly.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: "Based on its response, GOV intends to address our concerns on this matter."
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