Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Department of Unemployment Assistance (January 28, 2025)
January 28, 2025 · Department of Unemployment Assistance · 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 Massachusetts State Auditor performance audit of state employee settlement agreements and confidentiality clauses across the Governor’s Office, the Comptroller’s Office, 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 checked whether agencies properly reported monetary employee settlements to the Comptroller and whether they had rules for using confidentiality or nondisclosure language in those settlements.
“In this performance audit, we determined the following:”
The report says weak rules and missing records make it harder to know how public money is spent and whether employees are being treated 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.”
As a taxpayer and resident, this matters because settlement payments can use public money, and confidentiality clauses may hide problems that the public has a right to understand.
“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 internal policies for handling employee settlements, no documented policies for confidentiality language, unreported settlements, missing agreements, and missing underlying complaints.
“Executive offices and agencies have no documented policies and procedures over the use of confidentiality language in state employee settlement agreements.”
The auditor recommends formal policies, centralized oversight, better public reporting, stronger recordkeeping, training, and possible executive or legislative action limiting confidentiality language.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report is significant because it says the state could not fully show how these agreements were used, why confidentiality was included, or whether all required records were kept and provided.
“Our inability to obtain necessary records, due to so many documents either being withheld or missing – never mind the disorganization and lack of documentation across state agencies – warrants greater concern and urgency from this Administration.”
A state employee settlement is basically an agreement used to resolve a formal workplace 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.”
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 policies and procedures, employee settlements 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; Montana Legislative Audit Division performance audit best practices. ( 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 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: "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 obscure harassment, discrimination, other unlawful behavior, poor management, or inappropriate use of taxpayer dollars.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR’s Settlements and Judgments Policy; public records guidance; federal and state nondisclosure agreement legislation and rules. ( 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); Speak Out Act )
4 recommendations
- GOV should establish and implement policies and procedures regarding confidentiality language in employee settlement agreements and the 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 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: "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: Unreported settlements violate regulation and policy and may cause improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy; 815 CMR 5.09. ( 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 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 prevented testing for compliance with CTR reporting requirements and settlement list accuracy, reducing public transparency over public dollars.
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; Massachusetts Statewide Records Retention Schedule E05-03 )
1 recommendation
- GOV should ensure compliance with public records law and develop policies and procedures to retain employee settlement agreements under the Statewide Records Retention Schedule.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 or addressed to prevent recurrence.
Standard: Massachusetts Statewide Records Retention Schedule E05-02; Montana Legislative Audit Division best practices. ( 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 on request.agency: agreed
- Agencies should consult with the Supervisor of Public Records to classify and retain 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."
More audits of this entity
Other Office of the State Auditor reports on Department of Unemployment Assistance .
- Audit of the Department of Unemployment AssistanceState Agency / Office · June 15, 2018