Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Executive Office of Veterans' Services (January 28, 2025)
January 28, 2025 · Executive Office of Veterans' Services · 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 audit of employee settlement agreements and confidentiality clauses used by 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.”
Auditors wanted to know whether agencies properly reported money settlements to the Comptroller and whether they had rules for using confidentiality or nondisclosure language.
“whether state agencies developed and implemented policies and procedures regarding the use of confidentiality language, including nondisclosure clauses, within the context of state employee settlement agreements.”
The report warns that weak oversight can hide workplace wrongdoing, misuse taxpayer money, and leave employees unable or afraid to speak about what happened.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
For residents, this is about whether public money is spent openly and whether state employees are treated fairly when disputes are settled.
“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 settlement process, no documented confidentiality policy, 40 required settlements not reported to the Comptroller, missing settlement agreements, and missing underlying complaints.
“Executive offices and agencies did not report 40 state employee settlement agreements to the Office of the Comptroller of the Commonwealth when required.”
The auditor recommends formal policies, centralized oversight, better record retention, public reporting, and limits on confidentiality language in settlement agreements.
“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 report matters because it says Massachusetts lacked a reliable way to track, justify, retain, and disclose settlement agreements that may involve public money and workplace misconduct.
“Our inability to obtain necessary records, due to so many documents either being withheld or missing – never mind the disorganization and lack of documentation across state agencies – warrants greater concern and urgency from this Administration.”
5 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 uniform policies and procedures, the Governor’s Office cannot ensure settlement agreements are handled fairly, ethically, legally, consistently, or transparently, and the lack of process can cause financial reporting errors.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government, used as a best-practice benchmark; Montana Legislative Audit Division best-practice recommendation on settlement documentation and standard language. ( Section 12 of Chapter 11 of the Massachusetts General Laws; 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 that policies and procedures are adhered to and to provide reporting to the public regarding the use of these agreements.agency: agreed
- GOV should establish a public reporting process to ensure sufficient transparency and accountability for the use of 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: "Our audit noted that these differences in the approval of a settlement agreement were not documented in a policy during the audit period."
Why it matters: Confidentiality language may be used to conceal harassment, discrimination, unlawful conduct, poor management, or repeated inappropriate behavior, while preventing public understanding of taxpayer-funded settlements.
Standard: Public Records Law principles, the 2013 Boston Globe Superior Court case, CTR’s Settlements and Judgments Policy, the federal Speak Out Act, and comparable state best practices on confidentiality and nondisclosure clauses. ( 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; Massachusetts Senate rule 11G )
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 on the use of confidentiality language in an employee settlement agreement should weigh the employee’s right to privacy versus the public’s right to know how state funds are spent.agency: partially agreed
- GOV’s policy on the use of confidentiality language in a settlement agreement 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: "We agree."
Why it matters: Failure to report settlement agreements violates regulation and policy and may result in improper accounting and tax reporting by the Commonwealth and employees.
Standard: Section 5.09 of Title 815 of the Code of Massachusetts Regulations and CTR’s Settlements and Judgments Policy. ( 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 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 sufficient monitoring controls to ensure compliance and the appropriate management of this issue.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 the audit team from testing compliance with CTR reporting requirements and verifying whether agency settlement lists were accurate, creating a 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; Section 12 of Chapter 11 of the General Laws )
1 recommendation
- GOV should ensure that state agencies comply with public records law and should develop policies and procedures to ensure that state employee settlement agreements are retained in accordance with the Massachusetts Statewide Record 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: "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, agencies may fail to identify inappropriate behavior and prevent recurrence, and auditors cannot assess whether confidentiality language was justified.
Standard: Massachusetts Statewide Record Retention Schedule E05-02 and Montana best-practice recommendation for settlement support documentation. ( 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 that complaints are first documented and then retained in accordance with the Massachusetts Statewide Records Retention Schedule and are provided to external auditors upon their request.agency: agreed
- Agencies should consult with the Massachusetts Supervisor of Public Records to ensure that they accurately classify these records and should then ensure that they retain them according to the requirements of the Massachusetts Statewide Records Retention Schedule.agency: agreed
- If complaints arise out of substantiated egregious behavior, such as illegal or harmful acts, these records should be retained permanently to ensure that this behavior can be tracked across state government.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."