Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Technology Services and Security (January 28, 2025)
January 28, 2025 · Executive Office of Technology Services and Security · 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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“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 Auditor review of how the Governor’s Office, the Comptroller, and 73 executive branch agencies handled employee settlement agreements from 2010 through 2022.
“This is the first audit report released by the Office of the State Auditor as part of a comprehensive performance audit of state employee settlement agreements.”
The Auditor examined whether agencies properly reported monetary settlements and whether they had rules for using confidentiality or nondisclosure language.
“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.”
Without clear rules, the public cannot easily see whether settlements are fair, lawful, consistent, or a good use of taxpayer money.
“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 taxpayer, this matters because public money can be used in settlements, and poor oversight can hide problems or waste money.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The report’s main message is that Massachusetts needs a stronger, clearer, more public system for employee settlements and confidentiality clauses.
“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, better reporting, stronger recordkeeping, possible executive action, and legislation to limit secrecy in workplace-related settlements.
“Your office has committed to taking actions on some of our audit’s recommendations.”
The audit found large-scale gaps: 2,029 self-reported settlements costing over $40.8 million, 159 with confidentiality language identified, 40 required settlements not reported to the Comptroller, and many missing records.
“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 state employee settlement agreement means an agreement resolving a formal workplace-related claim by a current or former state employee, such as a grievance, complaint, or lawsuit.
“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, GOV cannot ensure settlements are handled fairly, ethically, legally, consistently, or transparently, and CTR may not have the opportunity to review intended payment processing.
Standard: US Government Accountability Office Standards for Internal Control in the Federal Government, and cited best practices from Montana’s Legislative Audit Division. ( US Government Accountability Office’s Standards for Internal Control in the Federal Government; 815 CMR 5.00 )
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 could be used to conceal harassment, discrimination, other unlawful behavior, poor management, or inappropriate conduct, while limiting transparency about taxpayer-funded settlements.
Standard: Green Book internal control standards, Boston Globe public-records decision, CTR’s Settlements and Judgments Policy, Public Records Law guidance, and cited federal and state nondisclosure agreement laws or rules. ( Boston Globe Newspaper Co. v. Exec. Office of Admin. and Finance, Suffolk Sup. No. 11-01184-A; 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 confidentiality language and 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 violates regulation and policy and may cause improper state accounting and tax reporting.
Standard: CTR’s Settlements and Judgments Policy requiring all monetary settlements and judgments to be reviewed by CTR before payment. ( 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 agreements impaired testing of CTR reporting compliance and settlement-list accuracy, and raised concern that information could be withheld from public view.
Standard: Massachusetts Statewide Records Retention Schedule requirements for employee complaint, grievance, complaint, personnel action, and disciplinary records. ( Massachusetts Statewide Records Retention Schedule E05-01; Massachusetts Statewide Records Retention Schedule E05-02; Massachusetts Statewide Records Retention Schedule E05-03 )
1 recommendation
- GOV should ensure agencies comply with public records law and retain employee settlement agreements according to 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 understand why confidentiality language was included or assess whether unlawful behavior was appropriately addressed.
Standard: Massachusetts Statewide Record Retention Schedule requirements for employee grievance and complaint records. ( Section 12 of Chapter 11 of the General Laws; Massachusetts Statewide Record Retention Schedule E05-02 )
3 recommendations
- GOV should develop policies and procedures to document, retain, and provide complaints to external auditors upon request.agency: agreed
- Agencies should consult with the Supervisor of Public Records on accurate classification and retention requirements.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."