The Federal Reserve’s internal watchdog found no evidence of criminal wrongdoing in the central bank’s renovation of its Washington headquarters, a $2.4 billion project that became a flashpoint between the Fed and the Trump administration as the president pushed for lower interest rates last year.

The findings came in a report released Wednesday by the Office of Inspector General that identified a series of missteps that led to surging costs for the renovation from an initially budgeted $1.3 billion in 2020.

“At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the U.S. Attorney General in accordance with the Inspector General Act,” the OIG said. “Further, while our report outlines deficiencies in the management of the renovation project, resulting in our recommended corrective actions in accordance with the Inspector General Act, we did not identify administrative misconduct during our evaluation.”

In a response included with the report, Fed Chairman Kevin Warsh said the central bank would implement its recommendations and that the General Services Administration, which helps manage federal government buildings, would take over the project, reporting to the Fed’s Board of Governors and to Warsh.

“There are important lessons to be learned, and those lessons, combined with your conclusions and with recommendations from GSA, will have permanent value for our successors on the Board of Governors,” Warsh wrote in a letter to Michael Horowitz, the IG who was appointed to the job by Powell in June 2025.

The Fed will also engage an independent auditor to scrutinize all awarded costs to date, Warsh said.

Among its findings, the watchdog found the Fed’s board didn’t act on failings linked to cost overruns on a previous project. Specifically, following the OIG’s review of the renovation of the Fed’s William McChesney Martin Jr. Building, the board failed to implement a recommendation that it impose a stated cost limitation. It also didn’t ask for a construction cost estimate.

As recently as July, four years after the project began and after tenders had been awarded, the Fed had not established a guaranteed maximum price. Other issues highlighted by the OIG included substantial cost increases due to a lack of bids for some work and internal governance that, according to the report, wasn’t equipped to run a project of this magnitude and complexity.

Design changes, site conditions and inflation were other factors cited by the OIG.

“We found that inflation was clearly a factor in the cost increases faced by the board,” along with the other issues, the report said.

Recommendations include ensuring steps are taken to secure best value as work is completed, to establish a project-cost and schedule-success metric, and to delegate responsibility to an oversight body to monitor cost and schedule implementation.

Trump criticisms

The renovation project drew stinging criticism from President Donald Trump and Republican lawmakers who accused the Fed of overspending and extravagant designs. Those charges were followed by a criminal investigation into then-Fed Chair Jerome Powell over his handling of the project.

U.S. Attorney for the District of Columbia Jeanine Pirro dropped the inquiry in April after lawmakers from both parties objected. But she said she would scrutinize the inspector general’s findings, signaling she could reopen the case.

The OIG’s review was ordered up by Powell in July 2025 in response to the renovations’ critics. Powell had previously acknowledged cost overruns for the renovations but pushed back on suggestions that the project was extravagant.

At issue is the Fed’s renovation of two historic buildings, the Marriner S. Eccles Building, its original headquarters first built in 1937, and an adjacent 1931 federal building acquired by the Fed in recent years. The central bank has said the renovations were designed to modernize aging structures and would reduce costs over time by consolidating its operations.

Criticism of the project began to mount over 2025. In response the Fed added and updated a “frequently asked questions” page on its website devoted to the project, describing why costs had increased. Powell also disputed some of the design features that critics targeted.

“There’s no VIP dining room, there’s no new marble,” Powell told lawmakers in June 2025. “There are no special elevators — there’s just, there are old elevators that have been there — there are no new water features, there’s no beehives and there’s no roof terrace gardens.”

The OIG report said features such as marble, water features or a garden terrace did not materially drive the cost surge.

Trump toured the building site with Powell in July 2025. Fed staffers at the time said security elements — including blast-resistant windows, shear walls and progressive collapse measures — designed to meet Department of Homeland Security standards, had contributed to rising costs.

A dramatic escalation came in January when Powell said the central bank had been served grand jury subpoenas from the Justice Department threatening a criminal indictment. In a forceful written and video statement released in response, Powell accused the administration of launching the investigation in response to the Fed’s refusal to lower interest rates to Trump’s satisfaction.

The move “should be seen in the broader context of the administration’s threats and ongoing pressure,” Powell said at the time.

Fallout from the probe threatened to derail the Fed’s leadership transition as Republican lawmakers held up Warsh’s confirmation hearing until Pirro dropped the inquiry.

Just days after that announcement, however, Powell announced he would break with tradition and remain at the central bank as a governor after his term as chair expired in May.

“I have said that I will not leave the board until this investigation is well and truly over, with transparency and finality, and I stand by that,” he said.

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