Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies - Tranche 2 (January 16, 2026)
January 16, 2026 · Tranche 2 · Read the full official report on mass.gov ↗
Published January 16, 2026 Audit covers January 1, 2019 – December 31, 2024 Under Diana DiZoglio · 2023–present
source
“Of the 21 state agencies under audit, 19 did 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 Massachusetts State Auditor performance audit of employee settlement agreements and confidentiality clauses across 21 state agencies for 2019 through 2024.
“As such, our review of the use of employee settlement agreements was completed at 21 state agencies for the period January 1, 2019 through December 31, 2024.”
The auditor checked whether agencies properly reported monetary settlements to the Comptroller and whether they had rules for using confidentiality language.
“Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.”
These settlements use public money and can affect public employees, so weak rules make it harder to know whether agencies acted fairly and legally.
“This results in an inconsistent process that is not transparent to the people of the Commonwealth regarding how public employees are treated or how their tax dollars are being spent.”
For an ordinary taxpayer, the issue is whether public agencies are spending money on settlements openly and whether confidentiality clauses hide problems the public should know about.
“This prevents the public from clearly seeing the issue, which could be better or worse than people suspect.”
The report says agencies need clearer written policies, better records, more public reporting, and better compliance with Comptroller rules.
“We found that 7 state agencies did not report 13 state employee settlement agreements to the Office of the Comptroller of the Commonwealth, as required by state regulation.”
The auditor recommends that agencies create written policies, central oversight, public reporting, staff training, and controls to make sure settlements are tracked and reported correctly.
“Agencies should establish sufficient monitoring controls to ensure compliance and the appropriate management of this issue.”
A “monetary” settlement means an agreement or judgment that leads to payment, affects retirement credit, or creates a future commitment of state money, services, or resources.
“A “monetary” settlement or judgment includes any action which results in a payment being made to, or on behalf of a Claimant, or which may impact “creditable” service for retirement calculation purposes for a state employee, or which may result in a future commitment of funds, services or state resources.”
4 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Did state agencies included as part of this audit report all monetary employee settlement claims to CTR in accordance with Section 5.09 of Title 815 of the Code of Massachusetts Regulations (CMR) and CTR’s “Settlements and Judgments” policy?
- Partially To what extent, if at all, have agencies included as part of this audit developed and implemented policies and procedures regarding the use of confidentiality requests, including non-disclosure agreements, within the context of employee settlement agreements?
What the Auditor found
Why it matters: Agencies could not ensure employee settlements were handled fairly, ethically, legally, consistently, or transparently, and risked financial reporting errors.
Standard: GOV’s Executive Department Settlement Policy; US Government Accountability Office Standards for Internal Control in the Federal Government; CTR’s Settlements and Judgments Policy. ( Section 12 of Chapter 11 of the General Laws; 815 CMR 5.00 et seq. )
3 recommendations
- The 19 agencies identified in this finding should establish and implement policies and procedures over the authorization, development, documentation, and retention of state employee settlement agreements and requirements for supporting documentation.
- Agencies should provide centralized management and oversight over the use of state employee settlement agreements.
- Agencies should establish a public reporting process for transparency and accountability for state employee settlement agreements.
Agency response & Auditor reply
Agency: "The AGO cannot concur with this finding as it applies to the AGO."
Auditor: "The Office of the State Auditor (OSA) acknowledges that AGO is subject to CTR’s “Settlements and Judgments” policy, the Massachusetts Statewide Records Retention Schedule, and AGO’s Special Assistant Attorney General Guidelines."
Why it matters: Confidentiality language may be abused to conceal harassment, discrimination, or other inappropriate, unlawful, or unethical behavior.
Standard: GOV’s Executive Department Settlement Policy; CTR’s Settlements and Judgments policy; Massachusetts Public Records Law guidance. ( G. L. c. 4, § 7, cl. 26(c); Public Records Law, G.L. c. 4, §. 7, 26 (a) and (c) )
1 recommendation
- The 20 agencies should establish and implement policies and procedures for confidentiality language in state employee settlement agreements, at minimum in line with GOV’s Executive Department Settlement Policy.
Agency response & Auditor reply
Agency: "This finding is factually inaccurate as to the AGO."
Auditor: "OSA agrees that AGO did not use confidentiality language during our review of AGO’s state employee settlement agreements, according to our findings."
Why it matters: The Auditor could not test whether agencies complied with CTR reporting requirements or whether settlement lists were accurately described.
Standard: GOV’s Executive Department Settlement Policy; Massachusetts Statewide Records Retention Schedule; Section 12 of Chapter 11 of the Massachusetts General Laws. ( Section 12 of Chapter 11 of the Massachusetts General Laws; Massachusetts Statewide Records Retention Schedule E05-01, E05-02, E05-03 )
1 recommendation
- The three agencies should develop policies and procedures to retain settlement documentation according to the Massachusetts Statewide Records Retention Schedule.
Agency response & Auditor reply
Agency: "The settlement was a payment required pursuant to an arbitration award which OSA never requested as it was a judgment not a settlement and thus CCCC did not provide information on judgments in its Audit requests."
Auditor: "We did not misconstrue this as an employee settlement, rather CCCC reported this to CTR as a settlement agreement, and it was paid through the Settlement and Judgment fund."
Why it matters: There could potentially be more state employee settlements that were not self-reported to OSA.
Standard: GOV’s Executive Department Settlement Policy; Section 12 of Chapter 11 of the General Laws; best practices from Montana’s state employee settlements audit. ( Section 12 of Chapter 11 of the General Laws; GOV’s Executive Department Settlement Policy )
1 recommendation
- Agencies should develop policies and procedures to accurately record and track state employee settlements internally and report information accurately to CTR.
Agency response & Auditor reply
Agency: "The OSA wrote asking that MassArt share the information for . . . additional settlement matters.."
Auditor: "MassArt indicates in its response that the 2 settlement payments were made pursuant to its NUP handbook."
Why it matters: Failure to report settlement agreements may cause improper accounting and tax reporting and violates regulation and policy.
Standard: CTR’s Settlements and Judgments policy dated January 10, 2022; GOV’s Executive Department Settlement Policy; 815 CMR 5.00 et seq. ( 815 CMR 5.00 et seq. )
3 recommendations
- Agencies should establish and implement policies and procedures over reporting state employee settlement agreements to CTR.
- Agencies should train staff involved in the employee settlement process on these policies and procedures.
- Agencies should establish monitoring controls to ensure compliance.
Agency response & Auditor reply
Agency: "The university is committed to complying with the State Comptroller’s Settlements and Judgments Policy, including submitting all agreements for review whether self-funded or funded by the Settlements and Judgments Reserve account."
Auditor: "OSA appreciates BSU’s stated commitment to comply with CTR policies regarding reporting employee settlement agreements."
Prior findings revisited
"This is the second comprehensive, multi-entity audit report released by OSA focused on state employee settlement agreements, with the first report being issued on January 28, 2025."