Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Revenue (includes 62F Tax Review) (January 28, 2025)
January 28, 2025 · Department of Revenue (includes 62F Tax Review) · 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 Auditor performance audit of employee settlement agreements and confidentiality clauses across the Governor’s Office, the Comptroller, and many 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 audit looked at 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:”
These agreements use public money and can affect employees during serious workplace disputes, so weak rules can hide problems, misuse taxpayer funds, or leave the public unable to see what happened.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
As a Massachusetts resident or taxpayer, this affects whether you can see how public money is spent and whether state government is handling workplace complaints fairly.
“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 auditor found missing policies, weak oversight, unreported settlements, missing records, and too little documentation behind settlements that included confidentiality language.
“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 report recommends formal policies, centralized oversight, better public reporting, better record retention, and limits on confidentiality language; the Governor’s Office said it would take some policy and training steps.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report is significant because the auditor says poor management of settlements can hide abuse, discrimination, retaliation, or other misconduct, and can prevent government from learning from serious problems.
“Our audit identifies areas of financial, legal and ethical risks for the Commonwealth – when our fellow public servants are at their most vulnerable.”
A settlement agreement is a written deal to resolve a claim, complaint, grievance, or lawsuit, often involving money or other terms; confidentiality language means wording that limits what people can say about the agreement or dispute.
“For the purposes of this audit, we reviewed state employee settlement agreements that resulted in monetary and non-monetary awards.”
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, settlements may not be handled fairly, legally, ethically, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office Standards for Internal Control in the Federal Government; CTR settlement requirements; best practices from Montana Legislative Audit Division. ( 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 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: "In its response, GOV cited policies that existed during the audit period, notably CTR’s Policy on Settlements and Judgments, and the associated regulations at 815 CMR 5.00."
Why it matters: Confidentiality language could be used to conceal harassment, discrimination, other unlawful behavior, poor management, or inappropriate conduct, and employees may not know that nondisclosure terms may be unenforceable.
Standard: US Government Accountability Office Standards for Internal Control in the Federal Government; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR Settlements and Judgments Policy; Massachusetts Public Records Law guidance; federal and state nondisclosure agreement legislation and rules cited as best practices. ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; CTR’s Settlements and Judgments Policy; Speak Out Act; Massachusetts Senate rule 11G )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements and required supporting documentation.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: "In its response, GOV cited a statement within the CTR Settlements and Judgments Policy explaining to departments 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 settlements violates regulation and policy and may cause improper 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; Section 5.09 of Title 815 of the Code of Massachusetts Regulation )
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 the 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: "For GOV’s edification, the 40 monetary state employee settlement agreements identified in this finding did meet the definition of a “monetary” settlement according to CTR’s Settlements and Judgments policy."
Why it matters: The missing agreements limited testing of CTR reporting compliance and settlement list accuracy, increased the risk that settlements were not reported, and could undermine public trust.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the Massachusetts General Laws. ( Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11of the General Laws )
1 recommendation
- GOV should ensure agencies comply with public records law and develop policies and procedures to retain and provide settlement agreements upon request.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."
Why it matters: Without complaint records, inappropriate behavior may not be identified and corrected, and auditors could not assess the reason for confidentiality language.
Standard: Massachusetts Statewide Record Retention Schedule and Section 12 of Chapter 11 of the Massachusetts General Laws. ( Massachusetts Statewide Record Retention Schedule; 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 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: "Our office was not provided with documentation or evidence that demonstrated whether appropriate steps were taken by executive offices and agencies regarding the destruction of public records."
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