A Federal Reserve inspector general report released Wednesday found significant management and oversight failures behind cost overruns at the central bank’s headquarters renovation, but said it found no grounds for a criminal referral.
The watchdog said there were no reasonable grounds to believe a federal criminal law violation had occurred that would require a referral to the U.S. attorney general. The report nevertheless detailed how the renovation’s cost climbed from an estimated $1.3 billion in 2020 to a board-approved budget of $2.4 billion as of August 2026.
Construction costs alone increased by $960 million.
Fed Renovation Costs Surge as Oversight Falls Short
The inspector general found that inflation contributed to rising costs, but said some project expenses increased substantially more than overall producer prices. Producer price inflation rose 16% during the renovation, while plumbing and heating, ventilation and air conditioning costs increased 223%.
The report also found that the Fed failed to enforce a guaranteed maximum price for the project. Its oversight structure, involving numerous committees, did not ensure that rising costs were consistently escalated to senior leadership.
The findings are significant for the Federal Reserve because the central bank is designed to operate independently from the executive branch and manages its own budget. The report raises questions about how the institution oversees major capital projects and accounts for its spending.
President Donald Trump used the report to renew his criticism of former Fed Chair Jerome Powell, arguing that Powell should resign from the Fed’s Board of Governors. Trump has repeatedly criticized Powell over the renovation while also pressing the Federal Reserve to reduce interest rates.
Powell has said he planned to remain on the board after his term as chair ended until the investigation into the renovation was completed. He can remain a governor through January 2028.
The inspector general’s office also reviewed materials related to Powell’s 2025 congressional testimony about the project but did not make any finding of misconduct concerning that testimony.
The investigation was led by Fed Inspector General Michael Horowitz, who Powell appointed in June 2025 after requesting the investigation. The report’s findings come after a separate criminal investigation into the renovation was dropped in April.
Fed Chair Kevin Warsh welcomed the inspector general’s findings and said the Fed would adopt its recommendations. He also plans to conduct a full audit of the renovation and has asked the General Services Administration to serve as project executive going forward.
