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Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Mental Health (January 28, 2025)

January 28, 2025 · Department of Mental Health · 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

In plain English
The auditor says Massachusetts agencies handled employee settlement agreements inconsistently, kept poor records, sometimes failed to report settlements, and lacked clear rules for confidentiality clauses.
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
What is this?

This is a state audit of employee settlement agreements and confidentiality clauses used 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.”
Why was it audited?

Auditors wanted to know whether agencies properly reported employee settlements to the Comptroller and whether they had rules for using confidentiality or nondisclosure language.

“In this performance audit, we determined the following:”
Why it matters

The report says weak controls can hide workplace problems, misuse public money, and keep the public from understanding how employees and tax dollars are handled.

“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.”
What's in it for me?

As a taxpayer, this matters because settlement payments can involve public money, and the report says the public does not currently get a full, clear picture of all such payments.

“In the interest of transparency to the public on the use of taxpayer funds for state employee settlement agreements, we recommend that the Office of the Governor (GOV) develop a process to report all monetary state employee settlement agreements to the public, regardless of the funding source, and that this information be published prominently and that it remains available for public inspection for an extended period of time.”
The bottom line

The auditor found a broken, inconsistent system and recommended written policies, centralized oversight, better reporting, better record 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.”
What happens next

The Governor’s office said it would create a public settlement policy, require agencies to adopt their own related policies, and work with the Comptroller on training and reporting improvements.

“The Office of the Governor will issue a public Executive Department Settlement Policy applicable to all executive department offices and agencies.”
Why it's significant

The audit covered a large amount of money and activity: more than 2,000 reported settlements costing over $40.8 million, though auditors said missing records prevented a fully clear 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.”
Jargon, unpacked

A state employee settlement agreement means an agreement resolving a formal claim by a current or former state worker, such as a grievance, complaint, or lawsuit.

“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

What the Auditor found

Executive offices and agencies lacked documented policies and procedures for authorizing, developing, documenting, and retaining employee settlement agreements.
internal controlsrecordkeeping/documentation

Why it matters: Without policies and procedures, employee settlements may not be handled fairly, ethically, legally, or consistently, and the process lacks transparency for taxpayers.

Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, known as the Green Book. ( 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: "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."
Executive offices and agencies lacked documented policies and procedures governing confidentiality language in employee settlement agreements.
internal controlsrecordkeeping/documentationdata privacy

Why it matters: Confidentiality language may be used to cover up harassment, discrimination, or other unlawful behavior and may restrict employees from speaking about matters that should be public.

Standard: Public Records Law, the 2013 Superior Court decision in Boston Globe Newspaper Co. v. Executive Office of Administration and Finance, and CTR’s Settlements and Judgments Policy. ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; Public Records Law, G.L. c. 4, §. 7, 26 (a) and (c) )

4 recommendations
  • GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements.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.”"
Auditor: "There is no policy, however, prohibiting or permitting them or regulating their use."
Executive offices and agencies failed to report 40 required monetary employee settlement agreements to CTR.
reporting timelinessinternal controls

Why it matters: Failure to report settlement agreements violates regulation and policy and may result in improper accounting and tax reporting.

Standard: CTR’s Settlements and Judgments Policy requires all monetary settlements and judgments to be reviewed by CTR before payment. ( 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."
Agencies did not provide all requested employee settlement agreements.
recordkeeping/documentationinternal controls

Why it matters: Missing settlement agreements prevented the auditors from testing compliance with CTR reporting requirements and verifying whether settlement lists were accurate.

Standard: The Massachusetts Statewide Records Retention Schedule requires agencies to retain employee complaint, grievance, disciplinary, and personnel action records for specified periods. ( 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 for retaining and producing state employee settlement agreements.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: "There were 57 settlement agreements requested during the course of the audit that agencies did not provide upon our request."
Agencies did not provide most underlying employee complaints for settlements involving confidentiality language.
recordkeeping/documentationinternal controls

Why it matters: Without underlying complaint records, auditors could not assess whether confidentiality language was justified or whether unlawful behavior was appropriately addressed.

Standard: The Massachusetts Statewide Record Retention Schedule requires employee grievance and complaint records to be retained according to specified retention periods. ( 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, centrally tracked, and provided to external auditors upon request.agency: agreed
  • Agencies should consult the Massachusetts Supervisor of Public Records to classify and retain these records correctly.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."

More audits of this entity

Other Office of the State Auditor reports on Department of Mental Health .

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