Stop Settlement Slush Funds Act of 2016 (Sec. 2) This bill prohibits government officials from entering into or enforcing a settlement agreement resolving a civil action on behalf of the United States that provides for a payment to any person or entity other than the United States. The bill provides exceptions to allow payments that remedy actual harm (including to the environment) caused by the party making the payment or that constitute payment for services rendered in connection with the case. Government officials or agents who violate this prohibition may be removed from office or required to forfeit to the government any money they hold for such purposes to which they may otherwise be entitled. Federal agencies must report annually for seven years to the Congressional Budget Office about the parties, funding sources, and distribution of funds for their settlement agreements permitted by the exceptions in this bill. Agency inspectors general must report annually to Congress about any of their agency's settlement agreements that violate this bill.