Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Housing and Livable Communities (January 28, 2025)
January 28, 2025 · Executive Office of Housing and Livable Communities · 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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“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 Auditor performance audit of 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 looked at whether agencies properly reported employee settlements to the Comptroller and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
Without clear rules, settlements may be handled unevenly, records may be missing, public money may be hard to track, and confidentiality language could hide serious workplace problems.
“If GOV does not have a transparent and accountable process to guide the use of nondisclosure, non-disparagement, or similarly restrictive clauses in state employee settlement agreements, it cannot ensure that state employee settlements are handled in an ethical, legal, or consistent manner.”
As a taxpayer, this matters because these settlements used public money, and the public may not have been able to see clearly how that money was spent or whether problems were being fixed.
“This publicly available report shows only monetary state employee settlement agreements paid using the Settlements and Judgments fund.”
The auditor found missing policies, inconsistent reporting, missing records, and weak oversight, and called for a major cleanup of how the state manages these agreements.
“We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview.”
The report recommends formal policies, centralized oversight, public reporting, better record retention, and limits on confidentiality clauses; the Governor’s Office said it would take some actions.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The audit covers a large slice of state government and found 2,029 self-reported employee settlement agreements costing more than $40.8 million during the audit period.
“Based on state employee settlement agreement lists provided to us by the executive offices and agencies listed in Appendix C, during the period of January 1, 2010 through December 31, 2022, the audited agencies entered into 2,029 state employee settlement agreements with a total cost in excess of $40,839,452.”
A settlement agreement is a written deal used to resolve an employee dispute, sometimes with money and sometimes without; confidentiality language can limit what people say about the deal.
“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: 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; best practices from Montana Legislative Audit Division. ( 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 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: "CTR’s policy establishes policies that agencies must follow—though not all did—in order to pay for the cost of settlement agreements."
Why it matters: Confidentiality language could be used to cover up harassment, discrimination, unlawful behavior, poor management, or other inappropriate conduct.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; 2013 Superior Court decision in Globe Newspaper Co. v. Executive Office of Administration and Finance; CTR’s Settlements and Judgments Policy; Public Records Law guidance. ( Public Records Law, G.L. c. 4, §. 7, 26 (a) and (c); 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 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 an employee with detrimental behavior in the workplace.agency: partially agreed
- The Governor should consider implementing an executive order to limit the use of 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: "There is no policy, however, prohibiting or permitting them or regulating their use."
Why it matters: Failure to report settlement agreements violates regulation and policy and may cause improper accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy; 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 the reporting of 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: The missing agreements prevented testing of Comptroller reporting compliance and settlement list accuracy, creating risk that agreements were withheld or unreported.
Standard: Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the General Laws. ( E05-01: Employee Complaint/Investigation/Disciplinary Records; E05-02: Employee Grievance/Complaint Records; E05-03: Personnel Action Records )
1 recommendation
- GOV should ensure compliance with public records law and develop policies and procedures to retain and provide state employee settlement agreements.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: "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 included or whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the General Laws. ( E05-02: Employee Grievance/Complaint Records; 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 with the Massachusetts Supervisor of Public Records to classify and retain these records properly.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."