Audit of Settlement Agreements and Confidentiality Clauses Across Multiple State Agencies—Tranche 2 - Finding 1

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.

Overview

Of the 21 state agencies under audit, 19 did not have policies or documented procedures on the use of state employee settlement agreements. The 19 agencies were as follows:

Berkshire Community College (BCC)	Massachusetts Office for Victim Assistance
Bridgewater State University (BSU)	Middlesex Community College (MCC)
Bunker Hill Community College (BHCC)	Nantucket County Sheriff’s Office
Cape Cod Community College (CCCC)	Office of the Attorney General (AGO)
Fitchburg State University (FSU)	Office of the Commissioner of Probation (OCP)
Greenfield Community College (GCC)	Roxbury Community College (RCC)
Massachusetts College of Art and Design (MassArt)	Springfield Technical Community College (STCC)
Massachusetts College of Liberal Arts (MCLA)	Suffolk County District Attorney’s Office
Massachusetts Commission Against Discrimination (MCAD)	Worcester State University (WSU)
Massachusetts Maritime Academy (MMA)

There generally were no documented policies or procedures on these basic aspects of the state employee settlement process, including the following:

1. requirements for authorization/approval of state employee settlement agreements by agency employees or management.
2. development of draft state employee settlement agreements (who would draft agreements, the use of outside assistance, which employees would be interviewed, retention of discussion notes, etc.);
3. documentation of an employee’s claim resulting in a state employee settlement agreement; and
4. records retention regarding the storage of these records, how they should be retained, where they should be retained, and for what period of time.

The Office of the Inspector General (OIG) did provide us a copy of an administrative guidance document, titled “OIG Procedures for Handling Settlements and Judgments,” dated June 13, 2024. Additionally, the Massachusetts Port Authority (Massport) provided its “Internal Operating Procedures—Legal Actions” policy, which describes the delegation of authority, reporting requirements, and approvals for settlement of claims.

Our review of the collective bargaining agreements (CBAs); non-union professional (NUP) handbooks; employee manuals; and Affirmative Action, Equal Opportunity, and Diversity policies revealed that, while the policies outline the employee complaint process, they do not describe the process for developing the terms included in a resulting settlement agreement or ensuring that monetary settlements are properly reported to the Office of the Comptroller of the Commonwealth (CTR) for review.

When we asked the state agencies under audit for their documented policies or procedures, agency officials told us that they followed CTR’s regulations and policies over the processing and reporting of state employee settlement agreements to CTR. These regulations define a state employee settlement agreement and which settlement agreements must be reported to CTR for payment and/or proper financial reporting. Excluding OIG, this guidance was not incorporated into the policy documents provided to us, and the guidance did not address a variety of important issues, such as records retention or the use of confidentiality language.

If agencies do not have policies and procedures to handle state employee settlement agreements, then they cannot ensure that state employee settlements are handled in a fair, ethical, legal, and consistent manner. 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. It can also lead to potential errors in financial reporting by not allowing CTR the opportunity to review how a department intends to process state employee settlement payments.

Authoritative Guidance

The Office of the Governor’s (GOV’s) Executive Department Settlement Policy established the following requirement for obtaining authority to settlement, settling, and tracking settlements:

1. Applicability of the Office of the Comptroller’s Regulations and Settlements & Judgments Policy.

Executive department offices and agencies are reminded that the Office of the Comptroller’s settlements and judgments regulations, 815 CMR 5.00 et seq., and the Comptroller’s Settlements and Judgments Policy, are applicable to all monetary settlements within the scope of 815 CMR 5.00 et seq., whether the settlement occurs prior to or after the institution of litigation, and whether the settlement is paid from agency funds or the Settlements and Judgments Reserve. The requirements set forth in this Executive Department Settlement Policy serve as a supplement and do not supersede the requirements prescribed by the Office of the Comptroller.

2. Required Approvals for Settlement.

Settlements of $20,000 or more. An agency may agree to any settlement of $20,000 or more, other than a workers compensation settlement, only with the advance approval of: (i) the General Counsel of the Agency; (ii) the General Counsel of the Executive Office; and (iii) the Executive Office for Administration and Finance. After approval is received by the General Counsel of the Agency and the General Counsel of the Executive Office, the General Counsel of the Executive Office for Administration and Finance shall be provided with: (i) a written settlement recommendation, including the procedural status of the case and a summary of why settlement is appropriate; and (ii) the controlling complaint if the matter is in litigation, and the most pertinent judicial decision, if applicable. . . .

1. 6.   Executive Office Settlement Policies.

Each Executive Office shall promulgate a Settlement Policy, applicable to the office and its agencies, which policy shall be approved by the Executive Office for Administration and Finance. Office-specific settlement policies shall adhere to this Executive Department Settlement Policy and to all relevant requirements of the Office of the Comptroller, and shall include requirements for approvals of settlements of less than $20,000. Office-specific settlement policies shall be treated as public records.

The US Government Accountability Office’s Standards for Internal Control in the Federal Government, known as the Green Book, sets internal control standards for federal entities. The Green Book defines internal controls in the following way:

Internal control comprises the plans, methods, policies, and procedures used to fulfill the mission, strategic plan, goals, and objectives of the entity. Internal control serves as the first line of defense in safeguarding assets. In short, internal control helps managers achieve desired results through effective stewardship of public resources. . . . Management should design control activities to achieve objectives and respond to risks. . . . Management should implement control activities through policies.

While state agencies are not required to follow this policy, we believe it to be a best practice.

In June 2020, Montana’s Legislative Audit Division issued a performance audit titled “State Employee Settlements: Trends, Transparency, and Administration.” In this audit, a recommendation was given that the Montana Governor’s Office work with its administration department “to develop and implement policy establishing support documentation requirements and minimum standard settlement language that must be used for all state employee settlements.”

The report also cites the practices of other states. The state of Iowa required a memorandum documenting why a settlement should be offered and the circumstances surrounding it. The State of New Mexico has its personnel office review the settlement terms and decisions made to ensure that providing a settlement is an appropriate decision.

Reasons for Issue

The state agencies under audit stated that they rely on CTR guidance for the processing of settlement payments. Excluding OIG, they could not demonstrate that CTR policy documents for the processing and reporting of state employee settlement agreements were incorporated into their policies.

The state agencies under audit also rely on CBAs for the complaint process and reaching resolutions.

Recommendations

1. 1.    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. These policies and procedures should be uniformly communicated within all 19 state agencies. These policies and procedures should, at a minimum, encompass the requirements detailed in GOV’s January 2025 Executive Department Settlement Policy and CTR’s Settlements and Judgment Policy.
2. 2.    Agencies 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.
3. 3.    Agencies should establish a public reporting process to ensure sufficient transparency and accountability for the use of state employee settlement agreements. These agreements may impact employees and former employees when they are most vulnerable, which argues for additional public transparency and oversight to ensure that their use is consistent with policies and public expectations.

Auditee’s Response: AGO

The AGO cannot concur with this finding as it applies to the AGO. First, the AGO has internal guidance on settlement terms, as acknowledged by OSA on . . . the Draft Audit Report. This guidance is documented but was not shared with OSA because it is protected from disclosure by the attorney-client privilege. As we told your team, the internal guidance is issued by the AGO’s General Counsel, the only person at the AGO who enters into settlement agreements. Second, the AGO is also subject to several Commonwealth-wide policies that govern the authorization, development, documentation and retention of state employee settlement agreements and supporting records. These policies were available to your audit team, and the audit demonstrated that the AGO complied with all of these policies.

• The Office of the Comptroller’s Policy on Settlements and Judgments, and the associated regulations at 815 CMR 5.00 et seq., applied to the processing of settlements during the audit period and was mandatory for the AGO. See 815 CMR 5.02. The policy and regulations prescribed, among other things, record-keeping requirements and required written justifications for settlements (815 CMR 5.09(1)); required approvals for settlements at certain monetary levels (S&J Policy at p. 34); limitations on settlement agreement terms and available monetary compensation (S&J Policy at pp. 12-25); and limitations on the enforceability of confidentiality provisions (S&J Policy at p.8).
• The Secretary of State’s Statewide Records Retention Schedule required the retention of settlements and relevant supporting documentation during the audit period and applied to executive department offices and agencies. While the requirements differed somewhat depending on the nature of the claim being settled, the Schedule largely required that settlements and relevant supporting documentation be retained for a period of six years. See Schedule at D01-01(c): Primary copies of payment support documentation and transaction Postings; E05-01: Employee Complaint/Investigation/Disciplinary Records; and E05-02(c): All other records.
• The Attorney General Office’s Special Assistant Attorney General Guidelines, issued by the AGO’s General Counsel and protected by attorney-client privilege, establish settlement guidelines that, consistent with the AGO’s interpretation of Massachusetts law, do not permit non-disclosure clauses in settlement.

Third, the AGO’s settlement agreements are always entered into by the AGO’s General Counsel, who uses their legal judgment and expertise to evaluate claims and litigation risk. Development of additional internal policies on top of the above-described policies, where all AGO settlements are entered into by a single staff member, and where the AGO only averaged two settlements a year during the audit period, would not be a productive use of the AGO’s time or expertise. Moreover, it would serve no practical purpose, as any policy would rest these decisions in the hands of the General Counsel as they are now.

Fourth, the AGO does not find the OSA’s reference to the Governor’s Office Executive Settlement Policy instructive. That policy requires agencies to involve their General Counsel for settlements over $20,000—something the AGO already does for all settlements no matter the amount. The provisions about approval from the relevant Executive agencies do not apply as, like OSA, we are an independent agency. Given that the AGO was able to satisfy all the documentation requirements of the OSA during the audit—retained all agreements, submitted to the Comptroller, and did not include non-disclosure clauses in any agreements—the audit has not demonstrated the need for additional documentation.

Auditor’s Reply: AGO

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. However, as AGO refused to provide us with the written internal guidance that it states it has promulgated, we cannot state for the purposes of this audit report that AGO has written policies. That AGO refused to make its internal policy regarding state employee settlement agreements available for our review, citing attorney-client privilege, was its own choice. While we respect the sanctity of the attorney-client privilege doctrine, we disagree that policies outlining the procedures and processes for use of state employee settlement agreements unrelated to any specific claim, settlement, or negotiation have any protection under attorney-client privilege. The result of wrongfully asserting attorney-client privilege in this instance, instead of simply demonstrating to the audit team that written policies exist, is the inclusion of AGO in this finding. If a formal policy exists, but that policy is kept secret and will not be disclosed, under Generally Accepted Government Auditing Standards (GAGAS), we cannot claim the existence of such records in this audit report.

Additionally, we disagree that OSA’s reference to GOV’s Executive Settlement Policy is not instructive. The sheer fact that GOV issued a policy following the concerning findings laid out in our previous review of state employee settlement agreements underscores the need for and importance of having written, documented policies governing the authorization, documentation, and retention of state employee settlement agreements and supporting records to promote transparency and accountability, especially with regard to the expenditure of taxpayer dollars. We further note that the Governor’s policy for executive branch agencies has been made accessible to our office and the public, unlike the policy that AGO states should remain attorney-client privileged. This administration’s publicly accessible document is, in and of itself, certainly instructive, not just to AGO, but to any agency claiming that public agency policies are exempt from disclosure because of attorney-client privilege. As highlighted in our previous reports, the absence of documented, written policies has led to state employee settlement agreements being improperly and unlawfully executed across state government. So, while we are heartened to find and report that AGO complied with state regulations, we are disheartened by AGO’s vehement opposition to disclosing written policies to the public. We agree that AGO did retain and provide copies of its state employee settlement agreements, evidenced by its exclusion in Finding 3 of this report.

Auditee’s Response: BSU

Bridgewater State University does have well understood procedures on the authorization, development, documentation, and retention of state employee separation and settlement agreements and supporting records. During an audit meeting on Wednesday, November 6, 2024, the University provided a verbal explanation of its procedures. . . . The procedures shared at this meeting on November 6, 2024, are as follows:

1. 1.   The office of the Vice President in the division of Human Resources and Talent Management has responsibility for all labor and employee relations matters.
2. 2.   The President of the University authorizes the Vice President of Human Resources and Talent Management to engage in separation and/or settlement discussions. Prior to entering into any settlement discussions, consideration of utilizing a separation or settlement agreement is discussed by the Vice President of Human Resources and Talent Management with the President of the university. To be clear, discussions may happen after the receipt of a complaint, claim, demand or grievance or prior to separating an employee, at which time no complaint, claim, demand or grievance exists.

a.   When contemplating the use of an agreement, factors to consider include, but are not limited to, the type of employment matter, circumstances and facts pertaining to the matter, the terms of the collective bargaining agreement or non-unit professionals handbook, total cost of a settlement in comparison to the total cost of litigation, the time and distraction of litigation, etc.

1. Following authorization from the President to engage in settlement discussion or offer a separation agreement, the Vice President of Human Resources and Talent Management will begin drafting the agreement with the assistance of legal counsel. The proposed terms are often a starting point for negotiations.
2. The Vice President of Human Resources and Talent Management will ordinarily engage in settlement discussion or will instruct legal counsel to engage in settlement discussions, based on authorization received by the President. The rare exception to this process is when the Provost is involved in Step 3, mediation as part of the grievance process provided for in the Massachusetts State College Association and Board of Higher Education collective bargaining agreement. The Provost receives settlement authority directly from the President prior to the mediation.
3. As part of the drafting, legal counsel ensures all agreements are legally sound and inclusive of all relevant and applicable federal and state laws, including reference to public records law.
4. The President is kept apprised of settlement discussions throughout the negotiation process and all settlement terms are approved by the President.
5. The Vice President of Human Resources and Talent Management advises the Vice President for Finance/Chief Financial Officer of the financial terms of the agreement, if applicable.
6. The draft agreement is then shared with the employee’s representative whether that be legal counsel and/or their union representative.
7. After the draft agreement is finalized by both parties, the final agreement is then signed by the employee or their representative. The agreement is then also signed by the President of the University.
   1. In limited circumstances when a faculty grievance is resolved through the grievance process in the applicable collective bargaining agreement, the President of the University may authorize the Provost to serve as signatory.
8. Any executed separation or settlement agreement which includes financial terms requiring payment are then shared with the Director of Payroll Services for processing, when appropriate. If appropriate, the director of Payroll Services will process payment following the State Comptroller’s Settlement and Judgments Policy (attachment #1) utilizing the Procedures for [Human Resources Compensation Management System] LCM Payroll Entries for Settlements and Judgments for Current and Former Employees (attachment #2).
9. All executed separation or settlement agreements, claims/complaints/grievances and State Comptroller documentation are maintained in accordance with the Commonwealth of Massachusetts Records Retention Schedule, which includes the duration for retention, in the division of Human Resources and Talent Management, which also includes the department of Payroll Services. For at least the past ten (10) years, these agreements are maintained as part of a grievance file, if settled as part of grievance, or in a litigation file, if the agreement resulted from formal litigation. If the separation or settlement is specific to a particular employee, the agreement may be maintained in the employee’s personnel file as well.

The Reasons for Issue states the university “. . . could not demonstrate that Comptroller policy documents . . . were incorporated into their policies (page 33).” Contrary to this statement, the procedures detailed above demonstrate a well-understood, established, and consistent process, which includes the use of State Comptroller Policy documents. These procedures are managed by staff within the division of Human Resources and Talent Management with tenure in their positions of almost twenty (20) years. Further, the university ensures that its more recent settlement and separation agreements follow university practice of including language explaining the processing of payment through the State Comptroller’s Office, as well as the employee’s responsibility to consult with their attorney or tax professional concerning the tax implications of any financial term included in the separation or settlement agreement. Consistent with the requirements of the State Comptroller’s Settlement and Judgment Policy, the employee (or former employee) or the employee’s counsel are provided with the “Notice of Commonwealth Responsibilities for Settlement/Judgment Tax Withholdings, Intercept and Tax Reporting W-2, 1099-MISC and 1099-INT and Public Records Requests (attachment #3).” The Reasons for Issue section also notes reliance “. . . on CBAs for the complaint process and reaching resolutions . . . (page 33).” It is unclear why a state agency’s compliance with a collective bargaining agreement’s complaint process is a reason for issue.

Auditor’s Reply: BSU

BSU appears to confuse its compliance with a CBA or NUP handbook with our recommendation to have written, documented agency policies regarding this particular issue. It is true that BSU explained its process for handling settlement agreements during a process walkthrough in November 2024. When asked if BSU had written policies for addressing state employee settlements, we were told that there were none and were referred to guidance from CBAs and the NUP handbook. As stated in the finding, the documents we reviewed did not detail BSU’s process for entering into employee settlement agreements with respect to employees at large, including NUPs. As a best practice, OSA recommends documenting in its policies the process that BSU describes in detail above, so that all employees receive fair and consistent treatment, even those who are not covered by CBAs.

Auditee Response: MCLA

While the College does not have a written, documented policy regarding the authorization, development, documentation and retention of state settlement agreements, the College’s President approves all settlements (although the President may delegate this authority) and authorizes the College to enter into settlement negotiations. Further, the President is the decision maker regarding whether or not the College will agree to specific settlement terms. Moreover, Human Resources, with the assistance of counsel, when appropriate and to ensure consistency with the applicable CBA, NUP Handbook, and state and federal requirements, handles the drafting of settlements, which avoids concerns regarding fairness and inconsistency. The Vice President of Academic Affairs will also participate in the discussion of settlement terms when the matters involves an employee under the division of Academic Affairs.

Documentation of an employee’s claim (to the extent a claim exists), as well the settlement agreement and documentation submitted to or received by the CTR, are maintained in accordance with Massachusetts Statewide Records retention Schedule and, ordinarily, by the College’s Human Resources office. The College’s Human Resources office includes its payroll office. If the settlement is employee-specific (and not related to a group of employees), the settlement agreement generally includes language indicating that the settlement should be regarded as a personnel record and, therefore, will be maintained in the employee’s personnel file. Given Massachusetts Statewide Records Retention Schedule, the duration of how long a settlement agreement, claim and associated documentation, including communication to or from the CTR, will be maintained is in accordance with stated requirements; no additional timeline for retention of records will be established, as an alternative timeframe could run the risk of violating the state’s records retention requirements.

Auditor’s Reply: MCLA

We are encouraged to read MCLA’s response to our audit finding detail, in writing, the process it uses to execute employee settlement agreements. The process outlined in MCLA’s response should be used in its development of formal, written policies, as a best practice. As our audit team documented in Finding 4 of this report, we found that MCLA did indeed follow CTR’s “Settlements and Judgments” policy for processing the payments of settlement claims. Our recommendation is simply that MCLA document the procedures it outlines above in its response and ensure that the procedures include the authorization, development, documentation, and retention of state employee settlement agreements.

Auditee’s Response: Massachusetts Community Colleges (BCC, BHCC, CCCC, GCC, MCC, and STCC)

BCC, BHCC, CCCC, GCC, MCC, and STCC responded using the same response as follows:

Without question, in settling claims with current and former employees, the College follows the Massachusetts Office of Comptroller’s (“CTR”) published settlement policies, procedures, and regulations for state agencies, as well as all applicable collective bargaining agreements and employee handbook. To ensure compliance, the College may seek privileged legal advice and guidance from legal counsel handling the employment/labor matter (ex., Massachusetts Office of Attorney General (AGO), [the Office of the General Counsel (OGC)], [Human Resources Division] legal, and/or other applicable counsel). The College assesses any legal advice and counsel received and acts in the best interests of the College and in compliance with all relevant laws, policies, and procedures pertaining to settlements, conditions and terms of settlements. The College’s [chief financial officer (CFO)] and its General Counsel (and where applicable, other entities such as AGO) review and approve all monetary settlements utilizing the Settlements & Judgments Fund (“S&J”) overseen by CTR, as they are direct signatories to the S&J Application. Accordingly, while the College has not had “documented internal policies and procedures,” in the manner defined by OSA, it does follow the Commonwealth’s well-established written settlement policies, procedures, and regulations for state agencies, as well as applicable collective bargaining agreements and employee handbook. The Massachusetts Community Colleges take steps to stay current on applicable settlement authorities, including, for example, ensuring our training for our CFOs and [Human Resources] from OGC in June 2025 on the S&J Policy recently updated by CTR. Thus, OSA’s conclusion that state agencies, including [the College], “cannot ensure that employee settlement agreements are handled in an ethical, legal, or appropriate manner” without documented internal policies and procedures is unsupported, misleading, and not true for the College.

Auditee’s Response: RCC

RCC respectfully disagrees with OSA’s inclusion in this finding.

As explained during OSA’s November 4, 2024, virtual interview and in RCC’s March 21, 2025, response, the College’s settlement process is consistent with the Massachusetts Office of the Comptroller’s Settlements and Judgments Fund policies, applicable collective bargaining agreements (CBA s), and the Non-Unit Professionals Personnel Policies Handbook.

While RCC does not maintain a redundant written internal policy and procedure that mirrors the Commonwealth’s settlement policies and procedures, it follows the same legally binding settlement protocols applicable to all state agencies. The College’s CFO and legal counsel (including the Attorney General’s Office and/or the General Counsel for the Community Colleges) review all settlements before submission through the Comptroller’s approval process.

OSA’s assertion that agencies without internal policies “cannot ensure settlements are handled ethically or legally” is unsupported and inaccurate. RCC’s processes are governed by binding Commonwealth policies, collective bargaining statutes, and fiscal oversight structures that already provide the accountability OSA seeks.

Auditor’s Reply: Massachusetts Community Colleges (BCC, BHCC, CCCC, GCC, MCC, RCC, and STCC)

In Finding 5, we found that some of the community colleges responding to this finding violated state regulation by not reporting employee settlement agreements to CTR prior to payment, as required. These violations of state regulation may have been prevented if there had been policies and procedures in place when these agreements were executed. We are, therefore, disheartened by the responses to our audit findings by these community colleges, stating that since they believe they are following CTR’s “Settlements and Judgments” policy, any additional policies and procedures would be viewed as “redundant.” Due to the reality that state regulation was indeed violated by some of the community colleges listed in this finding, despite the claim that they all follow CTR’s “Settlements and Judgments” policy, we believe a bit of redundancy would be beneficial. The status quo resulted in these violations detailed in Finding 5. Without having documented policies, employee settlement agreements may not be handled in a consistent, appropriate manner. We note that several employee settlement agreements executed by community colleges responding to this finding relate to allegations and complaints of unlawful discrimination, sexual harassment, and potential sexual assault. (See Appendix A.) We strongly encourage the community colleges responsible for ensuring the safety and well-being of their employees and students on campus to reconsider their position against establishing better protocols to ensure increased accountability in their use of employee settlement agreements. Implementing policies can provide additional accountability with respect to the entire scope of the employee settlement agreement process, not merely the processing of payments. We strongly encourage the community colleges responding to this finding to see the value in implementing our recommendations, and we will be following up in approximately six months as part of our post audit review process.

Auditee’s Response: WSU

The Report notes the absence of a written policy regarding “when a settlement would be considered or used, or how one would be developed” in the context of a lack of procedures to ensure consistency and transparency in settlement agreements. However, the absence of a written policy regarding “when a settlement would be considered or used, or how one would be developed,” does not mean there are no procedures followed. Rather, the University’s President authorizes the University to enter into settlement discussions. If a claim (as defined by OSA) relates to a matter falling under the purview of Academic Affairs, the Provost, Human Resources leader and the President consult on whether to consider entering into a settlement agreement and, should settlement be appropriate, the terms of settlement. If a claim does not fall under the purview of Academic Affairs, the President, Human Resources and legal counsel, when appropriate, discuss whether entering into a settlement would be appropriate and potential terms of the settlement. Additionally, the University’s Chief Financial Officer is included and/or apprised of any monetary settlement discussions, as the [chief financial officer] is charged with submitting all monetary settlements and accompanying documentation to the CTR for review and processing, if necessary.

There are various factors taken into consideration in deciding whether to settle a matter, including, but not limited to: the cost and distraction of litigation, the allegations made, the terms of the relevant CBA (including the duration of time that may elapse while seeking to remove an employee), and the history of the parties. Settlements are drafted through Human Resources or Academic Affairs, at the direction of the President, unless such authority is appropriately delegated. During the Audit period, the University worked with its internal General Counsel and external counsel, when necessary, to ensure that such settlements were legally sound.

Further, in referencing reliance on the CTR’s policy for processing and reporting on state employee settlement, the Report concludes that the CTR’s “guidance does not serve as agency policy regarding the use and development of state settlement agreements.” To the contrary, the development of monetary settlements must align with the CTR’s Settlement and Judgment Policy and reference to the Settlement and Judgment Policy was not provided as an isolated “policy” that the University follows. As it must, the University adheres to settlement procedures that are aligned with the requirements of the CTR’s Settlement and Judgment Policy. The University also adheres to internal protocols, including the drafting of the agreement by or with the involvement of Human Resources and Academic Affairs and the aforementioned approval of settlement terms by the President (or their designee) upon consultation with counsel. To be clear, the President approves all settlements, regardless of the dollar amount.

Documentation of an employee’s claim (to the extent a claim exists), as well the settlement agreement and documentation submitted to or received by the CTR, are maintained in accordance with Massachusetts Statewide Records Retention Schedule and, ordinarily, by the University’s Human Resources office. The University’s Human Resources office includes its payroll office. If the settlement is employee-specific (and not related to a group of employees), the settlement agreement generally includes language indicating that the settlement should be regarded as a personnel record and, therefore, will be maintained in the employee’s personnel file. Given Massachusetts Statewide Records Retention Schedule, the duration of how long a settlement agreement, claim and associated documentation, including communication to or from the CTR, will be maintained is in accordance with stated requirements; no additional timeline for retention of records will be established, as an alternative timeframe could run the risk of violating the state’s records retention requirements.

Auditor’s Reply: WSU

We agree that WSU follows CTR’s policy in regard to processing payments of employee settlement claims and therefore excluded it from Finding 4, which focuses on CTR reporting. Our recommendation, however, is that WSU formally document policies and procedures, which may include many of the elements it describes in its response above. We note that this recommendation is consistent with our findings and recommendations for multiple auditees (including several state colleges and universities) across the first and second tranche of this audit, as well as across many other audits we have performed, which found that CTR’s “Settlements and Judgments” policy is not consistently followed throughout state government. Therefore, even though WSU did indeed correctly follow CTR policy, these policies and procedures are recommended as a best practice for all entities under review and should encompass the authorization, development, documentation, and retention of state settlement agreements. 

Auditee’s Response: MMA

While the Academy does not have a written, documented policy regarding the authorization, development, documentation and retention of state settlement agreements, the Academy follows standard procedures that ensure consistency in any settlements the Academy enters into. In addition to the requirement that the President act as the signatory regarding all settlements (although the President may delegate this authority), the President, as an initial matter, authorizes the Academy to enter into settlement negotiations. Further, the President is the decisionmaker regarding whether or not the Academy will agree to specific settlement terms.

If a claim (as defined by OSA) relates to a matter falling under the purview of Academic Affairs, the Provost, Dean of Human Resources and the President consult on whether to consider entering into a settlement agreement and, should settlement be appropriate, the terms of settlement. There are various factors taken into consideration in deciding whether to settle a matter, including, but not limited to: the cost and distraction of litigation, the allegations made, the terms of the relevant CBA (including the duration of time that may elapse while seeking to remove an employee), and the history of the parties. Despite the OSA’s dissatisfaction with the Academy’s response, the determination whether to settle matters is, in light of these factors, decided on a case-by-case basis. If a claim does not fall under the purview of academic affairs, the decision whether to engage in settlement discussions and the appropriate terms of settlement are usually decided through discussions between the Dean of Human Resources and the President. Again, the President provides the ultimate authorization to enter into a settlement agreement, including, but not limited to settlements that include monetary terms, subject to compliance with Comptroller’s settlements and judgements regulations and the Comptroller’s Settlement and Judgment Policy, when applicable. Moreover, the fact that each settlement is handled in the same manner, involving the dean or Human Resources and the President, ensures that settlements are addressed in a fair, ethical and consistent manner, while avoiding the concern expressed in the Report that employee settlements are handled inconsistently.

In terms of drafting the agreement, the Academy follows a standard protocol: the Dean of Human Resources (with the assistance of the Provost, if the claim falls within the purview of Academic Affairs) will draft the settlement with the assistance of legal counsel when necessary. Legal counsel serves to ensure that the agreement terms comply with all state and federal legal requirements, and that the terms appropriately address the allegations in the complaint, assuming a complaint exists. If the facts of a claim are not already known to the Academy, generally, the Dean of Human Resources will ordinarily investigate the claim to make a determination regarding the validity of the allegations. In short, it is standard procedure that the Dean of Human Resources has ownership over the drafting of any agreement and facilitating such drafting. The Dean of Human Resources or the Provost, if the matter relates to a grievance under Academic Affairs, negotiates the terms of settlement with the assistance of counsel, if and when necessary.

Documentation of an employee’s claim (to the extent a claim exists), as well as the settlement agreement and documentation submitted to or received by the CTR, are maintained in accordance with Massachusetts Statewide Records retention Schedule and, ordinarily, by the Academy’s Human Resources office. The Academy’s Human Resources office includes its payroll office. If the settlement is employee-specific (and not related to a group of employees), the settlement agreement generally includes language indicating that the settlement should be regarded as a personnel record and, therefore, will be maintained in the employee’s personnel file. Given Massachusetts Statewide Records Retention Schedule, the duration of how long a settlement agreement, claim and associated documentation, including communication to or from the CTR, will be maintained is in accordance with stated requirements; no additional timeline for retention of records will be established, as an alternative timeframe could run the risk of violating the state’s records retention requirements.

Auditor’s Reply: MMA

In its response, MMA seems to misunderstand our recommendation to memorialize record retention guidelines in its own policies as being contradictory to following the state’s record retention schedule. To be clear, the recommendation is to ensure that the public records retention schedule is properly followed by MMA and by every agency. The reason we highlight the need for memorializing not just timeframes, but overall policies and procedures as they pertain to the use of settlement agreements, is due to the fact that many agencies, despite telling our office that they follow CTR’s “Settlements and Judgments” policy and the state’s records retention schedule, do not always or consistently do so.

In its response, MMA states, “Despite the OSA’s dissatisfaction with the Academy’s response.” We are not dissatisfied with MMA’s response, however, it may be helpful to provide additional context here. In Finding 5, MMA was found to have failed to report 2 settlement agreements to CTR as required by state regulation.

We believe that MMA’s settlement policies and procedures should be solidified in writing to help ensure that these types of violations of CTR regulations do not occur in the future. These policies and procedures should encompass how to determine whether a settlement agreement is appropriate, how settlements are developed and documented, how settlements are approved and executed, and how documentation is retained. We make this recommendation as a matter of risk mitigation and to support the development of public faith in government, and we hope MMA sees the value in adopting our recommendations.

Date published:	January 21, 2026