Overview
We found that CIDAO should properly report all instances of monetary employee settlement agreements to the Office of the Comptroller of the Commonwealth (CTR). Specifically, CIDAO did not report a monetary employee settlement agreement to the Office of the Comptroller of the Commonwealth (CTR) before making payment. This employee settlement agreement was not brought to our attention when we made the request for a list of employee settlement agreements and was discovered as part of our data reliability analysis. The employee settlement agreement was finalized on November 6, 2019, for the amount of $17,015.32. The agreement did not specify any allegations; did not include non-disclosure, non-disparagement, or similarly restrictive clauses; and was paid using CIDAO funds.
We also discovered two severance payments for $14,000 and $3,500 that CIDAO paid to two former employees and did not report to CTR. We identified these payments after reviewing emails between CTR and CIDAO in which CTR asked about the nature of these payments. CIDAO told CTR that one of the two payments was part of a severance agreement between CIDAO and the employee. However, CIDAO was unable to provide written documentation for either of the severance agreements. According to CTR, severance agreements should also be reported when they include payments outside of regular compensation (i.e., outside of wages or unused vacation time).
During the audit, CIDAO told us that it had an undocumented process to handle employee settlement agreements. We consider written policies to be best practice. We believe such policies and procedures should apply to the review, approval, processing, and reporting of employee settlement agreements, including the use of any non-disclosure or related clauses.
A documented, written process to handle employee settlement agreements, especially for those containing non-disclosure, non-disparagement, or similarly restrictive clauses, can help ensure that employee settlements are handled in an ethical, legal, and appropriate manner. Additionally, if CIDAO does not maintain documentation regarding severance agreements, then it cannot determine whether the severance agreements included a release of future claims clause that would then require CIDAO to report the agreements to CTR.
Authoritative Guidance
According to Section 5.09 of Title 815 of the Code of Massachusetts Regulations (CMR),
(1) Responsibility of assigned attorney or staff person: Preparation of Reports. When litigation involving a monetary claim against the Commonwealth covered by these regulation terminates in a final Settlement or judgment with regard to such a claim, the agency attorney or staff person assigned to handle or monitor the claim shall do the following:
(a) Prepare a report indicating:
- the principal amount of the settlement or judgment
- the amount of any attorney’s fee award;
- the amount of any interest award or accrued, and whether the interest continues to accrue post-judgment;
- a request for payment of the amount;
- a description of the basis for the request, (e.g., Court order or settlement agreement); and
- whether the assigned attorney desires to award the payment check to the claimant
(b) Forward the report with a copy of the settlement or judgment just described to the General Counsel of [CTR] within the time frames set forth in 815 CMR 5.09(2).
(2) Time for preparation of reports. The report . . . shall be sent by the agency attorney to the General Counsel of the Comptroller:
(a) if based on a settlement agreement, within 15 days of signing of the final settlement papers; or
(b) if based on a judgment against the Commonwealth or any agency, within fifteen days of the Commonwealth’s decision not to appeal; or
(c) if based on a judgment against the Commonwealth or an agency, where the Commonwealth decides to take an appeal from the judgment, within fifteen days of any final order on appeal or in remand proceedings, if such remand proceedings are ordered.
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 and recommends that government entities design and implement them in the following excerpt:
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 CIDAO is not required to follow this policy, since it is not a federal entity, we consider it to be a best practice.
Reasons for Issue
CIDAO management told us that they were not aware of the requirement to report the employee settlement agreement to CTR before making payment, despite having communicated with CTR before making the payment. Additionally, CIDAO management told us that they were not aware they needed to report severance agreements to CTR.
Recommendations
- CIDAO should develop, document, and implement a written policy related to employee settlement agreements, including prohibiting the use of non-disclosure, non-disparagement, or similarly restrictive clauses in its agreements, as recommended in the Governor’s “Executive Department Settlement Policy,” issued January 27, 2025.
- CIDAO should maintain all records related to all types of employee settlement and severance agreements, particularly those that include a written release of future claims against CIDAO, in accordance with Massachusetts public records laws and the Massachusetts Records Retention Schedule.
- CIDAO should work with CTR to ensure that CIDAO understands the reporting requirements for all types of monetary employee settlement and severance agreements and ensure that CIDAO reports those agreements to CTR.
Auditee’s Response
The Cape and Islands District Attorney’s Office strongly disputes this finding. The audit finding includes that there was an employee settlement finalized on November 6, 2019. While I was not the District Attorney at that time and was not involved in that settlement, it remains outside of the identified audit period. The remainder of the audit findings addresses two severance payments made by this office prior to January 2023 when I became District Attorney. These severance payments were identified as “severance payments” and not settlements payments and are therefore outside of the audit scope of the documents requested by staff for purposes of the audit. As to these severance payments, I was not the District Attorney and was not involved in them, but regardless, they are outside of the scope of the audit.
The Cape and Islands District Attorney’s Office does have a contract with an employment firm to assist with all employment law issues that arise in our day-to-day work. The ability to work with a law firm specializing in employment law allows us to ensure that should there be any issues with employees there is a well-documented and transparent process for all. This is true for any employee settlement agreement, should one ever be needed regardless of whether they contain non-disclosure, non-disparagement, or similarly restrictive clauses. Any settlements or employee actions are and will be well documented and transparent.
Auditor’s Reply
CIDAO suggests the employee settlement agreement identified during the course of the audit was outside of the audit period. As stated in the “Executive Summary” and the “Audit Objectives, Scope, and Methodology,” the audit period for this specific objective was July 1, 2019 through June 30, 2024. A settlement agreement executed in November 2019 would fall within the audit period.
Severance agreements can also serve as settlement agreements in instances where the employer offers severance pay as an incentive for an employee to sign a severance agreement, waiving any potential legal claims. As stated in the finding, CIDAO’s email referenced a mutual agreement between itself and the employee.
When we inquired with CTR about this agreement, it was explained that if severance payments were made outside of the normal course of business and there was an agreement that included a release of future claims, CIDAO would need to report the agreement to CTR. CIDAO could not produce any documentation for the mutual agreement, including the terms of the subsequent severance payments. As a result, we brought the matter to CIDAO’s attention to ensure compliance with CTR’s “Settlement and Judgment Policy.” These severance payments are well within the scope of the audit. CIDAO mentions a well-documented and transparent process for dealing with employee issues that would also be true for employee settlement agreements, but a policy specific to the use of settlement agreements, including any requests for non-disclosure, non-disparagement, or similarly restrictive clauses, was not provided to our office.
We agree that these settlement agreements were executed before the swearing in of the current District Attorney. Our audit is of the governmental institution of CIDAO, and not the District Attorney. Government institutions should follow proper processes and procedures, retain appropriate documentation, and perform other functions regardless of who serves as their elected leader. The fact that CIDAO did not do this during the audit period (July 1, 2019 through June 30, 2024) does not reflect the actions of the current district attorney, but we raise these issues so agency leadership and management know about and can address these issues going forward. We recommend that CIDAO implement our recommendations, and we will follow up on them in approximately six months as part of our post audit review process.
| Date published: | November 25, 2025 |
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