Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Energy and Environmental Affairs (January 28, 2025)
January 28, 2025 · Executive Office of Energy and Environmental Affairs · 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 across the Governor’s Office, the Comptroller, and many executive branch agencies from 2010 through 2022.
“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of state employee settlement agreements.”
Auditors wanted to know whether agencies properly reported settlements involving money and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
The report says poor controls can hide misconduct, silence employees, and put public money at risk.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
As a taxpayer, this affects whether you can see how public employees are treated and how public money is spent on 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 auditor’s bottom line is that the current system needs major repair, with clearer rules, better records, and more public reporting.
“We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview.”
The Governor’s Office said it would take some actions, and the auditor attached proposed executive order and legislation ideas aimed at transparency and limits on confidentiality clauses.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The report is significant because it found missing policies, unreported settlements, missing records, and a lack of transparency across many state agencies over a 13-year period.
“During our audit, we identified more than $40.8 million paid by the Commonwealth in employee settlement agreements.”
A settlement agreement is a deal used to resolve an employee claim or dispute, sometimes with money and sometimes without money; confidentiality language can limit what people say about the agreement or underlying issue.
“For the purposes of this audit, we reviewed state employee settlement agreements that resulted in monetary and non-monetary awards.”
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, settlements may be handled inconsistently and without transparency, and CTR may not be able to review settlement payments for proper financial reporting.
Standard: US Government Accountability Office’s 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 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: "In its response, GOV cited policies that existed during the audit period, notably CTR’s Policy on Settlements and Judgments, and the associated regulations at 815 CMR 5.00."
Why it matters: Confidentiality language could be used to hide harassment, discrimination, other unlawful behavior, or poor management, while employees may not know such terms may be unenforceable under public records law.
Standard: Public Records Law guidance, the 2013 Superior Court Globe Newspaper decision, CTR’s Settlements and Judgments Policy, and internal control best practices. ( 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 the required supporting documentation justifying its inclusion.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: "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 may cause improper accounting and tax reporting and violates CTR regulation and policy.
Standard: CTR’s Settlements and Judgments Policy and 815 CMR 5.09. ( CTR’s Settlements and Judgments Policy; Section 5.09 of Title 815 of the Code of Massachusetts Regulations )
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 agreements prevented the Auditor from testing CTR reporting compliance and settlement-list accuracy, increasing the risk that settlements were not properly reported 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; Section 12 of Chapter 11 of the General Laws )
1 recommendation
- GOV should ensure state agencies comply with public records law and develop policies and procedures to retain employee 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 included or whether unlawful conduct was properly addressed.
Standard: Massachusetts Statewide Records Retention Schedule E05-02 and support-documentation best practices. ( 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 and retain complaints under the statewide records retention schedule and provide them to external auditors upon request.agency: agreed
- Agencies should consult with the Supervisor of Public Records to accurately classify and retain these records.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."