Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Labor Standards - Division of Apprentice Standards (January 28, 2025)
January 28, 2025 · Department of Labor Standards—Division of Apprentice Standards · 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 performance audit of employee settlement agreements 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.”
The auditor reviewed whether agencies properly reported settlements and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
Without clear rules, the public cannot easily tell whether employees were treated fairly or whether taxpayer money was used properly.
“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 and resident, this affects how public money is spent, whether misconduct can stay hidden, and whether public employees can speak up safely.
“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 needs a major overhaul, with clearer rules, better recordkeeping, stronger reporting, and limits on secrecy clauses.
“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 statewide policies, public reporting, better retention of records, training, monitoring, and possible executive or legislative action.
“Your office has committed to taking actions on some of our audit’s recommendations.”
This was the auditor’s first report in a broader review of state employee settlements, and it found missing policies, missing records, unreported settlements, and possible transparency problems.
“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 to resolve an employee claim or dispute, sometimes involving money, job status, or other terms; 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, settlement agreements may not be 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 ( 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 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 conceal harassment, discrimination, unlawful behavior, poor management, or misuse of taxpayer funds.
Standard: CTR’s Settlements and Judgments Policy; Public Records Law; 2013 Superior Court decision in Boston Globe Newspaper Co. v. Executive Office of Administration and Finance ( 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 behavior in the workplace.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 can violate 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 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 limited testing, raised concerns about unlawful withholding, reduced transparency into public spending, and created risk that CTR reporting requirements were not met.
Standard: Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the General Laws ( Massachusetts Statewide Records Retention Schedule E05-01; Massachusetts Statewide Records Retention Schedule E05-02; Section 12 of Chapter 11of the General Laws )
1 recommendation
- GOV should ensure agencies comply with public records law and develop policies and procedures for retaining settlement agreements under 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: "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, auditors could not understand why confidentiality language was used or assess whether unlawful behavior was appropriately addressed.
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 upon request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to classify and retain these records accurately.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."
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