Overview
Even though MDAO did not enter into any settlement agreements during the extended audit period, July 1, 2019 through June 30, 2024, we found it should have had documented internal policies or procedures regarding employee settlement agreements during the extended audit period. 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.
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:
1. the principal amount of the settlement or judgment;
2. the amount of any attorney’s fee award;
3. the amount of any interest award or accrued, and whether the interest continues to accrue post-judgment;
4. a request for payment of the amount;
5. a description of the basis for the request, (e.g., Court order or settlement agreement); and
6. 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 the Comptroller 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 MDAO is not required to follow this policy, since it is not a federal entity, we consider it a best practice.
Reason for Issue
MDAO management informed us that policies and procedures related to employee settlements have not been established because they do not support the use of such agreements and do not anticipate engaging in them.
Recommendation
MDAO 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.
Auditee’s Response
As the Auditor’s report indicates, the Middlesex District Attorney’s Office is not subject to any of the requirements regarding settlements that have been established by state executive order. Nevertheless, as of September 1, 2025, the Middlesex District Attorney’s Office has modified its Employee Handbook to include a policy governing employee settlement agreements, particularly those containing non-disclosure, non-disparagement or similar restrictive clauses. This Handbook is issued to all employees and is accessible on the Office intranet. A copy of the policy has been provided to the Office of the State Auditor.
Auditor’s Reply
Based on its response, MDAO has taken measures to address our concerns regarding this matter. As part of our post-audit review process, we will follow up on this matter in approximately six months.
| Date published: | December 19, 2025 |
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