Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Division of Administrative Law Appeals (January 28, 2025)
January 28, 2025 · Division of Administrative Law Appeals · 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
“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.”
Read the plain-English breakdown
This is a State Auditor review of settlement agreements involving state employees 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.”
Auditors wanted to know whether agencies reported money-related employee settlements to the Comptroller and whether agencies had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
The report says weak rules and poor records can hide misconduct, make spending less transparent, and leave employees and taxpayers without enough protection.
“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 affects whether public money is tracked clearly and whether state agencies can use settlements to keep important workplace problems out of public view.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The auditor found missing policies, missing reports to the Comptroller, missing settlement documents, and missing underlying complaints, so the state could not fully show how these settlements were handled.
“Agencies did not provide us 78% of the underlying employee complaints for employee settlements that involved confidentiality language.”
The report recommends formal statewide rules, centralized oversight, better public reporting, training, better record retention, and limits on confidentiality language.
“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.”
The report frames this as a major transparency and accountability issue because settlements can reveal workplace problems and involve taxpayer money.
“These agreements represent an inflection point, where executive management can become aware of practices inside agencies where potential abuse or other inappropriate activity may be occurring.”
A settlement agreement is a written deal used to resolve a claim, complaint, grievance, or lawsuit without continuing the dispute in court or another process.
“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 be handled inconsistently, unfairly, without transparency, and with potential financial reporting errors.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; Montana Legislative Audit Division best-practice recommendations. ( 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: partially agreed
- GOV should provide centralized management and oversight over the use of state employee settlement agreements.agency: partially agreed
- GOV should establish a public reporting process for settlement agreements.agency: partially 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 obscure harassment, discrimination, unlawful behavior, poor management, or inappropriate conduct and may restrict employees who do not know such terms may be unenforceable.
Standard: Public Records Law, the 2013 Superior Court decision in Boston Globe Newspaper Co. v. Executive Office of Administration and Finance, CTR’s Settlements and Judgments Policy, and the Speak Out Act. ( 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 )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language in state employee settlement agreements and 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.”"
Why it matters: Failure to report settlement agreements 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 )
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: "The lack of clarity across executive branch agencies further underscores the urgent need to clarify, document and communicate policies and ensure appropriate monitoring of employee settlement agreements, as there appears to even be confusion as to what a “monetary” settlement is, even though we simply utilized the same definition taken from the CTR’s Settlements and Judgments policy which we were told was the existing statewide policy that GOV says it followed."
Why it matters: Missing settlement agreements prevented testing of CTR reporting compliance and settlement-list accuracy, creating risk that agreements were not properly reported or accounted for.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the Massachusetts 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 agencies comply with public records law and develop policies to retain settlement agreements under the statewide retention schedule.agency: disagreed
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, auditors could not assess why confidentiality language was used or whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Records Retention Schedule E05-02. ( Massachusetts Statewide Record Retention Schedule E05-02; Section 12 of Chapter 11 of the General Laws )
3 recommendations
- GOV should develop policies to ensure complaints are documented, retained, and provided to external auditors upon request.agency: partially agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to classify and retain these records correctly.agency: partially agreed
- Complaints involving substantiated egregious behavior should be retained permanently.agency: partially 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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