Audit Urges More Transparency in State Employee Settlements

The audit found state employee settlement costs increased from $350,000 in Fiscal Year 2014 to nearly $1.4 million in Fiscal Year 2018

By Associated Press

HELENA – Montana state agencies and the Legislature should update policies to improve the transparency of state employee settlements, legislative auditors said Friday.

The recommendations follow an audit requested by Senate Majority Leader Fred Thomas, R-Stevensville, to determine whether the number and cost of employee settlements had increased while Democratic Gov. Steve Bullock was in office.

Bullock responded that an executive order he issued last year covers much of the audit’s recommendations, while others are directed at the Legislature.

The audit found state employee settlement costs increased from $350,000 in Fiscal Year 2014 to nearly $1.4 million in Fiscal Year 2018, for a five-year cost of just under $5 million. Non-disclosure agreements were included in 65% of settlements and agencies acted without policy, rule or statute guiding such settlements, auditors said.

Settlements were reached in cases of discrimination complaints and employee discipline, but did not always include documentation supporting the reason for the settlement, auditors said. Auditors also recommended creating a template for settlement agreements and a centralized review of state employee settlements.

Bullock issued an executive order in May 2019 that bars most stage agencies from entering into confidential employee settlements, unless there is a compelling personal privacy interest. It also allows the Department of Administration to audit settlements.

“Executive branch agencies and the (Legislative Audit Division) staff have the same goals regarding employee settlements: provide a transparent and consistent database where the public can review employee settlement information,” Bullock wrote.

He also noted auditors studied information from the past five years because that is how long the state is required to retain settlement information. However the Legislature ordered a 15-year study that showed a decrease in settlement frequency, average size and total spending since 2003, he said.

“For this reason, the executive branch agencies that are the subject of this audit are concerned that the presentation of information in the audit could, in places, be misleading or sensationalize human resources functions that are routine to large employers,” Bullock said.

The audit included recommendations that the Legislature enact laws to define “employee settlement,” how cost should be considered and set reporting requirements. It also recommended the Legislature require agencies to conduct a documented balancing test of the public’s right to know and the individual’s right to privacy before including a non-disclosure agreement in a state employee settlement.

Bullock said his executive order and the state constitution meet those recommendations.

Stay Connected with the Daily Roundup.

Sign up for our newsletter and get the best of the Beacon delivered every day to your inbox.