Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office for Administration and Finance (January 28, 2025)
January 28, 2025 · Executive Office for Administration and Finance · 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
“There exists little more than a haphazard approach to executing settlements, including those containing confidentiality clauses, with an informal, verbal policy that was allegedly promulgated around 2018 regarding non-disclosure language.”
Read the plain-English breakdown
This is a performance 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.”
The auditor examined whether agencies properly reported monetary 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 controls can hide misuse of taxpayer money, mistreatment of public employees, or repeated workplace problems inside state agencies.
“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 spent transparently and whether state workers can speak up about serious workplace problems.
“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 no documented statewide rules for creating, approving, keeping, or tracking these settlement agreements, and no documented rules for 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 auditor recommends written policies, central oversight, public reporting, better recordkeeping, training, and limits on confidentiality language in employee settlements.
“GOV should provide centralized management and oversight over the use of state employee settlement agreements to ensure that policies and procedures are adhered to and to provide reporting to the public regarding the use of these agreements.”
The audit is significant because it found millions in employee settlements, missing records, unreported agreements, and possible gaps in public accountability across many state agencies.
“During our audit, we identified more than $40.8 million paid by the Commonwealth in employee settlement agreements.”
A settlement agreement is a written deal that resolves a claim or dispute, often without going to court; confidentiality language can restrict what someone says about it.
“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.”
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: Settlement agreements may not be handled fairly, ethically, legally, consistently, or transparently, and CTR may not have the information needed to review settlement payments.
Standard: US Government Accountability Office Standards for Internal Control in the Federal Government; CTR requirements; best practices from Montana’s Legislative Audit Division. ( Section 12 of Chapter 11 of the Massachusetts General Laws )
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.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: "It appears a number of agencies did not understand CTR’s policies or regulations, particularly the obligations to report settlement agreements to CTR, regardless of the funding source."
Why it matters: Confidentiality language could be used to conceal harassment, discrimination, unlawful behavior, poor management, or inappropriate use of taxpayer funds.
Standard: US Government Accountability Office Standards for Internal Control in the Federal Government; Boston Globe Newspapers public records decision; CTR Settlements and Judgments Policy; Massachusetts Public Records Law guidance; federal and state nondisclosure best practices. ( Public Records Law, G.L. c. 4, §. 7, 26 (a) and (c); Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A )
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: "This demonstrates that GOV agrees that the lack of a documented policy over the use of non-disclosure language exists and should be clarified in a written policy."
Why it matters: Settlement agreements may be improperly reported in the state accounting system and to tax authorities.
Standard: 815 CMR 5.09 and 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 state 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: "Based on its response, GOV plans to take some measures to address our concerns in this area."
Why it matters: The Auditor could not test compliance with CTR reporting requirements or verify that settlement lists were accurate, creating risk that public spending was obscured.
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; Massachusetts Statewide Records Retention Schedule E05-03; Section 12 of Chapter 11 of the General Laws )
1 recommendation
- GOV should ensure agencies comply with public records law and develop settlement-agreement retention policies and procedures.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: Auditors could not determine why confidentiality language was used or whether unlawful behavior such as discrimination or harassment was appropriately addressed.
Standard: Massachusetts Statewide Record Retention Schedule E05-02 and best practices from Montana’s Legislative Audit Division. ( 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.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records on accurate records classification and retention.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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