- Key takeaway: The Federal Reserve's Office of the Inspector General Wednesday issued a report on its evaluation of the central bank's ongoing renovations to its Washington, D.C., headquarters, and found no criminal wrongdoing but did find some areas for improvement in the Fed's project management capabilities.
- Expert quote: "We identified numerous factors that contributed to the significant construction cost increases, including inflation, limited subcontractor bidding, substantial Board design changes, and site conditions. We also found that the effect of some of these factors could have been mitigated by more effective project management and contract execution decisions." —Federal Reserve Office of Inspector General report.
- What's at stake: The renovations had been a sticking point for President Donald Trump, who had accused then-Chair Jerome Powell of negligence in his oversight of the yearslong project and the cost overruns that it has incurred.
WASHINGTON — A federal watchdog found no violations of federal criminal law in connection with the renovation of the Federal Reserve's headquarters.
The Federal Reserve Office of Inspector General, in a 120-page report released Wednesday, found that no administrative misconduct had taken place during the renovations but said the project's ballooning costs were due in part to mismanagement by the teams overseeing it, including the board's facility services section within the Division of Management.
The OIG launched its audit in July 2025 after then-Fed Chair Jerome Powell requested a review of the project's oversight and associated costs, following
"We identified numerous factors that contributed to the significant construction cost increases, including inflation, limited subcontractor bidding, substantial Board design changes, and site conditions," the Fed OIG's report said. "We also found that the effect of some of these factors could have been mitigated by more effective project management and contract execution decisions."
According to the OIG, one of the project's main problems began at the outset, when the board took a hands-off approach despite selecting a contract structure known as the Construction Manager at Risk method. The method could have helped the central bank stay within its intended budget and shielded it from outside factors such as rising construction costs caused by inflation.
The board did not obtain a project cost estimate from the construction manager until January 2026, about 3 1/2 years after construction began, despite setting a cost limitation of $857 million. The OIG also found that various internal oversight entities received status updates but did not have clearly defined roles or responsibilities for overseeing the project's costs and budget. The report added there was no clear measure of success to track the project's progress.
"Rather than establish a project cost ceiling and manage it, the Board increased the project's budget as costs escalated, thereby creating a pay-as-you-go approach," the report said.
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In response to the IG's findings, Fed Chair Kevin Warsh said that the Fed will bring in the General Services Administration, or GSA, to help oversee the remainder of the project. Warsh also said that the central bank will hire an independent auditor to "verify the accuracy and compliance of all awarded costs to date."
"Together with Administrator [Edward] Frost's team, the Federal Reserve will also lead a review of the project contracts, determine the value of any services not received, and pursue appropriate remedies," Warsh wrote. "As necessary we will seek reimbursement or project credits for any work paid for but not performed."
Part of the delay in completing the construction phase — which was initially expected to end in the second quarter of 2024 — was due to the Fed making changes to the project's design, pushing the expected completion date to December 2027. Specifically, the report said the board changed the interior design from predominantly open workspaces to predominantly enclosed offices, substantially delaying the construction project.
"The Board did not adhere to its design schedule and instead allowed for numerous design changes and modifications, resulting in significant delays in the submission of the GMP proposal that was initially planned for fall 2023, prolonged exposure to external cost drivers like inflation, increased costs resulting from construction redesigns, and an extended construction schedule," the OIG report said.
The report recommends that the Fed establish clear guidelines for who is responsible for overseeing the project and how those officials report on the progress. It also urges the central bank to negotiate a price ceiling for the project.
The report found that as of July 2026, more than four years into construction, the Fed had not set a price ceiling for the project, and therefore "still does not have cost certainty and has not transferred material risk to the construction manager of the project." Warsh in his response to the IG said the Fed will "promptly complete negotiations."
The inspector general's report found no wrongdoing by any Fed board members and said no referrals were made to the U.S. attorney general. The finding is significant for Fed Gov. Jerome Powell, who
Powell had been in the crosshairs of President Donald Trump for much of his time as chair, with the president insisting on lower interest rates and publicly bullying the then-chair to do more to lower them. The Justice Department
U.S. Attorney for the District of Columbia Jeanine Pirro in April
