The Federal Reserve’s internal watchdog has found that while the central bank mismanaged its $2.4 billion renovation project for its Washington, D.C. headquarters, there was no evidence of criminal conduct, concluding a Justice Department probe initiated during the Trump administration. The inspector general released a 120-page report Wednesday detailing numerous lapses in project oversight, cost control, and contract management, but cleared former Fed Chair Jerome H. Powell of wrongdoing.
The project, launched in 2022, aimed to modernize two buildings near the National Mall. However, costs more than doubled from initial estimates, with construction expenses alone rising from $921 million in early 2020 to over $2 billion by the end of 2024. The estimated completion date has slipped repeatedly, now projected for December 2027, well beyond the original mid-2024 target.
Key missteps identified in the report include the Fed board’s failure to secure a comprehensive early cost estimate or a guaranteed maximum price with contractors, which would have limited financial risk. Instead, the contract was divided into 84 smaller packages without an overall cap, effectively creating a cost-plus arrangement sensitive to inflation and rising expenses. A significant design change in 2023—from open workspaces to mostly closed offices—further delayed project progress and complicated budgeting.
Though the renovation drew criticism from former President Donald Trump and some Republican lawmakers for features perceived as extravagant—such as marble facades, private elevators, and water fountains—the inspector general concluded these elements did not materially contribute to cost overruns. Inflationary pressures following the COVID-19 pandemic, unforeseen issues like asbestos remediation, additional regulatory reviews, and demands from federal planning commissions also played roles in driving costs higher.
The renovation became a contentious political topic as Trump publicly pressured Powell to cut interest rates while attacking the project’s expenses. Trump’s Justice Department opened a criminal investigation into whether Powell had committed perjury regarding the renovation but dropped the probe earlier this year after a judge blocked subpoenas. Jeanine Pirro, the U.S. attorney for the District of Columbia, stated she may reconsider restarting the investigation depending on the inspector general’s findings; her office is currently reviewing the report.
Current Fed Chair Kevin Warsh, who took office in May, responded by transferring project oversight to the General Services Administration and announcing plans to hire an independent auditor to scrutinize all renovation costs. Warsh emphasized the need for stricter cost controls and accountability going forward, calling on all government agencies to demonstrate vigilance in managing resources.
Senators expressed differing views on the report. Massachusetts Democrat Elizabeth Warren criticized the previous investigation as politically motivated, while South Carolina Republican Tim Scott acknowledged the lack of criminal evidence but stressed that the Fed must manage public funds prudently. Some experts pointed out that large federal construction projects frequently face significant budget overruns, citing other government buildings with similar cost escalations.
The Fed board had delegated detailed project management to internal staff, who consistently reported the work as “on track” even as budgets ballooned and timelines slipped. The findings highlight challenges in federal oversight of complex construction and underscore the necessity for stronger controls to prevent future mismanagement.