Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Division of Standards (January 28, 2025)
January 28, 2025 · Division of Standards · 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 audit of employee settlement agreements and confidentiality clauses used by the Governor’s Office, executive branch agencies, and the Comptroller 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 properly reported paid settlements to the Comptroller and whether agencies had rules for using confidentiality or nondisclosure language in employee settlements.
“In this performance audit, we determined the following:”
The report says weak oversight can hide harassment, discrimination, or other misconduct, and can make taxpayers pay for problems without knowing what happened.
“By not having a documented policy on the use of confidentiality language in state employee settlement agreements, there is a risk that confidentially language may be used to cover up harassment, discrimination, or other unlawful behaviors, potentially allowing perpetrators to continue to remain in their position and engage in further unlawful behavior.”
As a taxpayer, you may be funding settlements; as a resident, you have an interest in whether government workers are treated fairly and whether public money is being spent openly.
“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, missing records, unreported settlements, and incomplete complaint files, so the auditor could not get a full picture of how these agreements were used.
“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.”
The auditor recommends formal policies, centralized oversight, public reporting, better record retention, training, and limits on confidentiality language; the Governor’s office said it would act on some recommendations.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report frames this as a transparency and ethics issue: settlement agreements can help resolve disputes, but poor oversight can protect powerful people, silence employees, and misuse taxpayer money.
“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 that resolves a claim, often without going to court; confidentiality language means wording that limits what people can say about the agreement or the facts behind it.
“For the purposes of this executive order, the definition of settlement agreement shall mean a written agreement resolving any claim (as defined by 815 CMR 5.02), written or unwritten, by any claimant for damages to compensate an injury or wrong allegedly suffered, directly or a result of the Commonwealth failing to prevent such damages, including but not limited to personal injury, violation of civil rights, breach of contract, failure to comply with contract bidding laws, assault, harassment, discrimination, retaliation, whistle blowing, incorrect or improper personnel determinations regarding pay, promotion or discipline, failure to comply with statutory or constitutional provisions applicable to employment, and eminent domain taking damages, misconduct, including any attorney's fees and interest associated with these claims.”
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, settlements may not be handled fairly, ethically, legally, consistently, or transparently, and financial reporting errors may occur.
Standard: US Government Accountability Office 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 )
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 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, unlawful behavior, repeated poor management, or misuse of taxpayer dollars.
Standard: CTR’s Settlements and Judgments Policy, Massachusetts Public Records Law guidance, and the 2013 Boston Globe settlement-agreement public-records case. ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; CTR’s Settlements and Judgments Policy )
4 recommendations
- GOV should establish and implement policies and procedures regarding the use of confidentiality language and supporting documentation justifying its inclusion.agency: partially agreed
- GOV policy should weigh employee privacy rights against the public’s right to know how state funds are spent.agency: partially agreed
- GOV 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 settlements violates regulation and policy and may cause improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09. ( 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 records limited testing, raised concerns about withheld information, and reduced transparency into public spending.
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 11of the General Laws )
1 recommendation
- GOV should ensure agencies comply with public records law, retain settlement agreements according to the Statewide Record Retention Schedule, and provide records to OSA 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: "We revisited the responses from the agencies that came in late and after our requested timelines and revised the figure, which still shows 47 settlements agreements were not provided to us in order for us to conduct our tests."
Why it matters: Without complaint records, auditors could not assess why confidentiality language was used or whether inappropriate behavior was 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 and procedures to ensure complaints are documented, retained, and provided to external auditors upon request.agency: agreed
- Agencies should consult the Supervisor of Public Records to classify records and retain them as required.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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