Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies (January 28, 2025)
January 28, 2025 · Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies · 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
“There is no documented policy on the use of confidentiality language for GOV and other executive offices and agencies.”
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 73 other executive branch agencies from 2010 through 2022.
“As such, our review of the use of employee settlement agreements was completed at GOV, CTR, and 73 other executive branch agencies for the period January 1, 2010 through December 31, 2022.”
The auditor wanted to know whether agencies properly reported money settlements to the Comptroller and whether they had rules for using confidentiality or nondisclosure language.
“In this performance audit, we determined the following:”
These agreements involve public employees, public money, and sometimes claims about harassment, discrimination, retaliation, or other misconduct, so weak oversight can hide problems from taxpayers.
“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 affects whether public money is tracked, whether settlements are visible, and whether state agencies are held accountable for how they treat workers.
“Mismanaging these agreements puts taxpayers at risk and silently condones the continued ability to exploit taxpayer dollars to protect powerful officials.”
The audit says the state lacked written rules, missed required reporting, could not provide many records, and needs stronger public reporting and oversight.
“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.”
The auditor recommended written statewide policies, centralized oversight, better record retention, public reporting, training, and limits on confidentiality language.
“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.”
The report is significant because it says the state spent more than $40 million on these settlements during the audit period, while oversight and records were incomplete.
“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 used to resolve a workplace claim or dispute, often instead of going to court; confidentiality language means wording that limits what people can say about the agreement or the dispute.
“For the purposes of this audit, we reviewed state employee settlement agreements that resulted in monetary and non-monetary awards.”
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 policies and procedures, employee settlements may be handled inconsistently, unfairly, or without transparency, and settlement payments may be reported incorrectly.
Standard: US Government Accountability Office’s Standards for Internal Control in the Federal Government; CTR requirements for processing and reporting settlements; cited best practices from Montana’s performance audit on state employee settlements. ( Section 5.09 of Title 815 of the Code of Massachusetts Regulations; 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: "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 may be used to cover up harassment, discrimination, or other unlawful behavior, limit transparency, and obscure misuse of taxpayer dollars.
Standard: CTR’s Settlements and Judgments Policy; Massachusetts Public Records Law guidance; Boston Globe Newspaper Co. v. Executive Office of Administration and Finance; federal and state best-practice restrictions on nondisclosure clauses. ( Boston Globe Newspaper Co. v. Executive Office of Administration 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 confidentiality language and supporting documentation justifying its inclusion.agency: partially agreed
- GOV’s policy should weigh employee privacy rights 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: "In its response, GOV cited a statement within the CTR Settlements and Judgments Policy explaining to departments 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.”"
Why it matters: Unreported settlements 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; Section 5.09 of Title 815 of the Code of Massachusetts Regulations )
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 reporting 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: "As referenced in our finding, 71.43% of the settlement agreements tested during our audit were not reported to CTR even though CTR officials confirmed that they were required to be reported by executive offices and agencies."
Why it matters: Missing settlement agreements prevented testing of compliance and accuracy, increased the risk that settlements were not reported to CTR, and reduced public transparency over public spending.
Standard: Massachusetts Statewide Records Retention Schedule and Section 12 of Chapter 11 of the General Laws. ( 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 )
1 recommendation
- GOV should ensure agencies comply with public records law and develop retention policies for employee settlement agreements, including consideration of a centralized settlement list and storage-location tracking.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: "There were 57 settlement agreements requested during the course of the audit that agencies did not provide upon our request."
Why it matters: Missing complaint records prevented auditors from assessing why confidentiality language was used and whether inappropriate behavior was properly addressed.
Standard: Massachusetts Statewide Records Retention Schedule E05-02; Montana best-practice guidance on settlement support documentation. ( Massachusetts Statewide Records 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, including consideration of a centralized complaint list and storage-location tracking.agency: agreed
- Agencies should consult the Massachusetts Supervisor of Public Records to classify records accurately and retain them as required.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."