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Auditor Diana DiZoglio in a scathing new report called the executive branch's handling of employment settlements "dysfunctional" and "chaotic," saying agencies failed to operate with explicit policies for those agreements under the Patrick and Baker administrations.
Executive agencies also lacked policies to deal with confidentiality clauses, particularly nondisclosure agreements, which the audit warned could enable employers "to cover up harassment, discrimination, or other unlawful behaviors." That, in turn, would be an "inappropriate use of taxpayer dollars," according to the 164-page report released Tuesday that spans Jan. 1, 2010 through Dec. 31, 2022, just before Gov. Maura Healey took office.
DiZoglio, in the report's introductory letter to Gov. Maura Healey, wrote the "system in place regarding employee settlements in state government is dysfunctional – at best."
"There exists little more than a haphazard approach to executing settlements, including those containing confidentiality clauses, with an informal, verbal policy that was allegedly promulgated around 2018 regarding non-disclosure language," DiZoglio, a longtime critic of NDAs, said.
The auditor added, "We hope this Administration recognizes the need for an intensive overhaul of the broken system that currently exists under its purview. It's long past due that these issues be addressed."
Jesse Boodoo, deputy chief legal counsel for Healey, said the governor's office agrees with DiZoglio's goal of ensuring the settlement process is "consistent, transparent and fair." The administration disagrees with some of the report's specific findings, Boodoo wrote to William Kaplita, director of state audits, in a Dec. 27 letter shared with the News Service.
Boodoo pointed out existing policies for settlement agreements and recordkeeping, and emphasized a yearslong executive branch practice blocking the use of NDAs. Boodoo argued DiZoglio's report "appears to conflate non-disclosure agreements, which are forbidden by policy, with several other contract provisions, which serve legitimate purposes in appropriate circumstances.
"[W]e believe that fewer than 60 settlements during the audit period included language indicating that a settlement or settlement terms should be kept confidential, including just twelve settlements with documented confidentiality language between 2018 and 2022," wrote Boodoo, who noted the prevalence of "boilerplate" confidentiality language.
Healey, whose administration was not subject to DiZoglio's probe, preempted the auditor's report Monday as her office released a three-page settlement policy for the executive branch that codifies existing practices. The document largely responds to alarming findings and recommendations outlined in DiZoglio's report.
In the governor's formalized policy, one provision explicitly prohibits the use of NDAs in settlements, a practice the administration said the executive branch has typically followed since 2018 and continued under Healey's tenure. NDAs "erode public trust" and "are largely inconsistent with the transparency requirements of the public records law," the policy says.
Executive branch agencies must also improve their recordkeeping and tracking practices for settlement agreements under the policy, as well as publish their own public settlement policies.
Healey's policy does not meet all of DiZoglio's suggestions.
The audit advised Healey to issue an executive order barring state agencies from executing settlement agreements with nondisclosure, non-disparagement or confidentiality provisions. The report contains a copy of the order that DiZoglio had drafted in August, when the auditor thought she'd briefly serve as acting governor.
DiZoglio also called for the passage of legislation she filed this session – and attached to the report – that she says would prevent the abuse of taxpayer-funded NDAs in state agencies.
Auditor Diana DiZoglio's report says state settlements cost Massachusetts nearly $41 million between Jan. 1, 2010 and Dec. 31, 2022.
Auditor Diana DiZoglio's office
"Our office recognizes the value that settlement agreements bring to dispute resolution," DiZoglio wrote. "However, when there is chaotic mismanagement of taxpayer-funded settlement agreements, as was apparent under the prior administration, problems can arise, taxpayer dollars can be abused, perpetrators can be protected, employees can be forced into the shadows and waste and abuse can run rampant."
DiZoglio's office scrutinized 75 state agencies, which entered into 2,029 employee settlements that cost Massachusetts nearly $41 million over the audit period. The Executive Office of Health and Human Services had the highest settlement tally at 624, followed by the Executive of Public Safety and Security at 579 and MassDOT at 527.
Collectively, state agencies told the auditor only 146 settlements contained confidentiality language. DiZoglio's office discovered 13 additional settlements with confidentiality clauses, and the report says the count could be far higher.
The audit blasts agencies for their "failure to retain appropriate documentation," which DiZoglio's office said impeded its ability to verify claims. Departments also claimed they couldn't determine whether 525 other settlement agreements had confidentiality clauses.
Auditor Diana DiZoglio probed settlement agreements across 75 state agencies from Dec. 1, 2010 to Dec. 31, 2022.
Auditor Diana DiZoglio's office
Agencies didn't hand over all requested settlements, and they also didn't share nearly 80% "of the underlying employee complaints for employee settlements that involved confidentiality language," the report said.
DiZoglio's office recommended Healey implement settlement polices, provide "centralized management and oversight" of those policies, and establish a public reporting process to "ensure sufficient transparency and accountability." DiZoglio urged Healey to develop policies surrounding NDAs that "should not protect an employee with detrimental behavior (e.g., harassment or abuse) in the workplace."
Other recommendations involved ensuring state agencies comply with public records law and share requested information with "external auditors upon their request."
Boodoo disputed DiZoglio's assertion that settlements were possibly "unlawfully withheld" from her office. Boodoo said the executive branch worked "collaboratively and cooperatively" with DiZoglio's office and provided explanations when they could not locate a "small number" of agreements.
"The audit period predates the start of the Healey-Driscoll Administration, and the audit's findings reflect improvements to policies and practices brought about by advocacy and leadership in this area over time," Boodoo wrote.
