Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Economic Development (January 28, 2025)
January 28, 2025 · Executive Office of Economic Development · 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
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“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 State Auditor performance audit looking at employee settlement agreements and confidentiality clauses 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.”
The audit checked whether agencies properly reported employee settlements involving money and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
These agreements involve taxpayer money, public employees, and sometimes claims of mistreatment, so weak oversight can hide problems and reduce public trust.
“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 resident and taxpayer, this matters because public money may be used in settlements, and the public may not get a clear view of what was paid, why it was paid, or whether agencies fixed underlying problems.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The auditor found no documented statewide system for how agencies should approve, write, store, report, and oversee employee settlements, especially those with confidentiality language.
“The Administration has no apparent standard approach to records retention, no single point of data collection or analysis, and no demonstrable management of agencies’ use of confidentiality agreements.”
The auditor recommends formal policies, central oversight, better public reporting, training, stronger recordkeeping, and limits on confidentiality language, including possible executive action and legislation.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report is significant because it says the state paid more than $40 million in employee settlements during the audit period, yet lacked reliable systems to track, report, and explain all of them.
“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, such as a workplace dispute, without continuing a lawsuit or complaint process; confidentiality language can restrict what people say about the deal or the events behind 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.”
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, GOV cannot ensure settlements are 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, used as a best-practice internal control framework. ( 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 to ensure policies and procedures are followed and public reporting is available.agency: agreed
- GOV should establish a public reporting process for transparency and accountability over state 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: "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 conceal harassment, discrimination, unlawful behavior, poor management, or inappropriate uses of taxpayer dollars.
Standard: Public Records Law principles, the 2013 Boston Globe settlement-agreement public-records decision, CTR’s Settlements and Judgments Policy, and internal control 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; Speak Out Act )
4 recommendations
- GOV should establish and implement policies and procedures regarding confidentiality language and supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy should balance 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: "We again note here that CTR’s policy and regulations are not enforceable policy by the employer—they do not bind an agency in an executive office to any particular course of action related to settlement agreements."
Why it matters: Failure to report settlement agreements can violate regulation and policy and may cause 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 and proper management.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 CTR reporting compliance and settlement-list accuracy, creating risk that agreements were not properly disclosed or accounted for.
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 policies and procedures to retain 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: "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 evaluate why confidentiality language was used or whether unlawful behavior was properly addressed.
Standard: Massachusetts Statewide Records Retention Schedule E05-02 and Section 12 of Chapter 11 of the General Laws. ( 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 document, retain, and provide complaints to external auditors upon request.agency: agreed
- Agencies should consult the Massachusetts Supervisor of Public Records to classify and retain these records correctly.agency: agreed
- Complaints arising from 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."