Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Public Utilities (January 28, 2025)
January 28, 2025 · Department of Public Utilities · 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 performance audit of state employee settlement agreements and confidentiality clauses across the Governor’s Office, the Comptroller, and many executive-branch agencies from 2010 through 2022.
“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of state employee settlement agreements.”
The audit looked at whether agencies reported employee settlement payments to the Comptroller when required and whether agencies had rules for using confidentiality or nondisclosure language.
“whether state agencies developed and implemented policies and procedures regarding the use of confidentiality language, including nondisclosure clauses, within the context of state employee settlement agreements.”
These agreements use public money and can affect workers in vulnerable situations, so weak oversight can hide misuse of funds, unfair treatment, or workplace problems.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
As a taxpayer and resident, this affects whether public money is spent openly and whether state government is accountable when employee complaints are settled outside court.
“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.”
The audit found no documented statewide internal policies for how agencies should authorize, create, document, retain, and oversee employee settlements, and it found gaps in reporting and record production.
“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 recommended formal policies, centralized oversight, public reporting, better record retention, training, and limits on confidentiality language; the Governor’s Office said it would take some actions.
“Your office has committed to taking actions on some of our audit’s recommendations.”
This report is significant because it is the first in a broader audit effort and covers a large slice of state government, including 75 agencies and more than $40 million in reported settlements.
“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 state employee settlement agreement is a deal resolving a worker’s formal claim against a state agency; confidentiality language means wording that limits discussion or disclosure of the agreement or the issues behind it.
“During the audit, we were made aware of or were able to identify 159 state employee settlement agreements that included some form of confidentiality language, limiting the discussion or disclosure of the purpose for or terms of the settlement agreement.”
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 statewide policies, employee settlements may be handled inconsistently, unfairly, or without transparency, and CTR may not be able to review payments for proper financial reporting.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, cited as a best practice. ( US Government Accountability Office’s Standards for Internal Control in the Federal Government )
2 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
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 be used to obscure harassment, discrimination, or other unlawful conduct, and employees may not understand that nondisclosure terms may be unenforceable.
Standard: CTR’s Settlements and Judgments Policy, Massachusetts Public Records Law guidance, the 2013 Superior Court Globe Newspapers decision, and internal control best practices. ( CTR’s Settlements and Judgments Policy; Public Records Law; 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 the use of confidentiality language in state employee settlement agreements and the required supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy should weigh the employee’s right to 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 implementing an executive order to limit confidentiality language in employee settlement agreements.agency: partially agreed
Agency response & Auditor reply
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 settlements violates regulation and policy and may cause improper state accounting and tax reporting.
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 the reporting of 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 agreements prevented the auditors from testing CTR reporting compliance and settlement list accuracy, increasing the risk that some reportable settlements were not accounted for.
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; Section 12 of Chapter 11 of the General Laws )
1 recommendation
- GOV should ensure state agencies comply with public records law and develop policies and procedures to retain settlement agreements in accordance with the Massachusetts Statewide Record Retention Schedule.agency: disagreed
Agency response & Auditor reply
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, auditors could not assess why confidentiality language was included or whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Records 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 upon request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to accurately classify and retain these records.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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