Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Division of Insurance (January 28, 2025)
January 28, 2025 · Division of Insurance · 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 of employee settlement agreements and confidentiality clauses used by 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 auditor looked at whether agencies properly reported employee settlements to the Comptroller and whether agencies had rules for using confidentiality or nondisclosure language in those settlements.
“In this performance audit, we determined the following:”
The report says weak oversight can hide misconduct, silence employees, misuse taxpayer money, and make it harder for the public to know how state government is treating workers and spending public funds.
“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 used transparently and whether state agencies are held accountable when workplace problems lead to settlements.
“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 missing policies, weak documentation, unreported settlements, missing agreements, and missing underlying complaints, especially for settlements involving confidentiality language.
“Agencies did not provide us 78% of the underlying employee complaints for employee settlements that involved confidentiality language.”
The auditor recommends formal statewide policies, better recordkeeping, public reporting, training, monitoring, and limits on confidentiality language; the Governor’s Office said it would take some steps, including a public settlement policy.
“The Office of the Governor will issue a public Executive Department Settlement Policy applicable to all executive department offices and agencies.”
The report is significant because it says the state lacked basic oversight over agreements that can reveal workplace abuse, legal risk, and taxpayer-funded payouts, and the auditor says missing or withheld records limited the ability to see the full picture.
“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 settlement agreement is a written deal to resolve a claim or dispute, often involving money or employment terms; confidentiality language means wording that can limit what people can say about the agreement or the underlying issue.
“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, known as the Green Book ( 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: "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 may be used to cover up harassment, discrimination, or other unlawful behavior and may obscure repeated poor management or misconduct.
Standard: Public Records Law; 2013 Superior Court decision in Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR’s Settlements and Judgments Policy ( 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 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 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 result in improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy and 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 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 settlement agreements prevented testing of Comptroller reporting compliance and settlement list accuracy, increasing the risk that required agreements were not reported.
Standard: Massachusetts Statewide Records Retention Schedule; 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 compliance with public records law and develop policies and procedures for retaining employee settlement agreements and providing them to the Auditor 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 or addressed to prevent recurrence.
Standard: Massachusetts Statewide Record Retention Schedule E05-02 ( Massachusetts Statewide Record Retention Schedule E05-02 )
3 recommendations
- GOV should develop policies and procedures to document and retain complaints and provide them to external auditors upon request.agency: agreed
- Agencies should consult with the 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: "Based on its response, GOV intends to address our concerns on this matter."
More audits of this entity
Other Office of the State Auditor reports on Division of Insurance .
- Audit of the Division of Insurance (March 19, 2024)State Agency / Office · March 19, 2024
- Audit of the Division of InsuranceState Agency / Office · August 21, 2019