Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Public Health (January 28, 2025)
January 28, 2025 · Department of Public 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
source
“It is clear from our review of the issues examined in our report that the system in place regarding employee settlements in state government is dysfunctional – at best.”
Read the plain-English breakdown
This is a state audit looking at employee settlement agreements and confidentiality clauses across the Governor’s Office, the Comptroller’s Office, and dozens of 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 auditor reviewed whether agencies reported money-related settlements properly 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 leave the public unable to see how settlements are being used.
“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 spent transparently and whether state government learns from workplace problems instead of burying them.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The audit found no documented statewide approach for approving, creating, storing, and tracking employee settlements, and it found major gaps in records and reporting.
“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.”
The auditor recommends written policies, centralized oversight, public reporting, better record retention, training, and limits on confidentiality clauses; the Governor’s Office said it would take some steps.
“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 report is significant because it says agencies paid more than $40 million in employee settlements during the audit period, but the state lacked reliable records and oversight to show 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 to resolve a claim or dispute, often without going to court; confidentiality language can restrict what people say about the agreement or facts behind 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.”
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: Employee settlements may not be handled fairly, legally, ethically, consistently, or transparently, and CTR may not have the chance to review intended settlement payment processing.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; CTR settlement requirements; best practices from Montana’s Legislative Audit Division. ( 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: "It appears a number of agencies did not understand CTR’s policies or regulations, particularly the obligations to report settlement agreements to CTR, regardless of the funding source."
Why it matters: Confidentiality language could be used to hide harassment, discrimination, unlawful behavior, repeated poor management, or inappropriate conduct funded by taxpayers.
Standard: Public Records Law; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR’s Settlements and Judgments Policy; Speak Out Act; Senate rule 11G. ( 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.agency: agreed
- GOV’s policy should weigh employee privacy against the public’s right to know how state funds are spent.agency: agreed
- GOV’s policy should not protect employees with detrimental workplace behavior.agency: agreed
- The Governor should consider an executive order limiting confidentiality language in employee settlement agreements.
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: "We again note here that CTR’s policy and regulations are not enforceable policy by the employer—they do not bind an agency in an executive office to any particular course of action related to settlement agreements."
Why it matters: Settlement payments may be improperly reported in the state accounting system and by employees to tax authorities.
Standard: Section 5.09 of Title 815 of the Code of Massachusetts Regulations and CTR’s Settlements and Judgments Policy. ( CTR’s Settlements and Judgments Policy )
3 recommendations
- GOV should establish and implement policies and procedures over reporting 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: "As referenced in our finding, 71.43% of the settlement agreements tested during our audit were not reported to CTR even though CTR officials confirmed that they were required to be reported by executive offices and agencies."
Why it matters: The auditor could not test CTR reporting compliance or verify settlement lists, increasing the risk that required settlement agreements were not reported.
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 compliance with public records law and develop policies to retain and provide 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: "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: The auditor could not assess whether confidentiality language was supported by the underlying complaint or whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Record Retention Schedule E05-02 and Section 12 of Chapter 11 of the General Laws. ( 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 document, retain, and provide complaints to external auditors.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records on record classification and retention.
- Complaints involving substantiated egregious behavior should be retained permanently.
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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