Ministers have been urged to "get a grip" on so-called gagging orders that have seen millions of pounds handed to government staff.
The National Audit Office (NAO) condemned the lack of "transparency, consistency and accountability" around the compromise agreements - which can mean individuals pocket hundreds of thousands of pounds to leave jobs quietly.
The criticism came in a report by the public spending watchdog following widespread concern about the controversial deals.
There are claims that health service executives have been prevented from speaking out about poor care in hospitals. Local councils are also reported to have distributed hundreds of millions as a result of compromise agreements while the BBC paid out £28 million over the past eight years.
According to the NAO, the Treasury has signed off more than 1,000 special severance payments linked to compromise agreements since March 2010 - worth a total of about £28.4 million. But the true figure is likely to be higher as comprehensive records are not kept, and decisions are sometimes made by departments or through judicial mediation.
The watchdog found that 49 out of a sample of 50 cases included a confidentiality clause covering the existence and terms of the agreement. The auditors stressed that there were legitimate reasons for such deals, including protecting intellectual property or resolving grievances. None of those it looked at would have legally blocked an individual from whistleblowing.
NAO head Amyas Morse said: "Compromise agreements are widely, and often legitimately used. But the lack of transparency, consistency and accountability is unacceptable. With the public purse under sustained pressure and services increasingly delivered at arm's length, it is important that compromise agreements do not leave staff feeling gagged or reward the failure either of an employee or an organisation. The centre of government should get a grip on the use of compromise agreements in the public sector."
Public Accounts Committee chairman Margaret Hodge said: "It is staggering that no one has any idea how many compromise agreements are used and whether, overall, they are value for money."
Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "The extensive use of compromise agreements by public bodies is putting a huge burden on taxpayers and undermining accountability. Apart from concerns about the cost of the associated pay-offs, these deals are tantamount to gagging orders which in many cases represent rewards for failure. There is a real danger that they could be used to cover up serious failings and silence potential whistleblowers. The terms of these severance arrangements must be transparent so that taxpayers can judge whether they represent good value for their money and be assured that mistakes are not being covered up."
A Cabinet Office spokesman said: "All departments must weigh the importance of accountability and transparency, as well as value for money for the taxpayer, against any potential benefits when choosing to make a severance payment. As part of our robust approach to managing public money, departments wishing to make a special severance payment which is not contractually required must also seek approval from the Treasury. The decision on whether confidentiality clauses are included in settlements is a matter for individual departments. As the NAO notes, confidentiality clauses can have legitimate benefits - the Government's legal advisers provide guidance on their use and we continue to look at ways to strengthen this as central guidance."