Federal Reserve watchdog faults renovation cost controls but finds no grounds for criminal referral

The Federal Reserve's inspector general said Wednesday, September 30, that the central bank's renovation of two historic buildings in Washington was poorly managed and became more expensive, but its review found no reasonable grounds for a federal criminal referral. The finding separates documented problems with the project's cost controls from allegations of criminal wrongdoing that had made the renovation a political flashpoint.

In a 120-page review, the watchdog said the Board of Governors had not effectively managed and executed its construction contract and had repeatedly departed from its cost management provisions. The inspector general said it found no reasonable grounds to believe a violation of federal criminal law had occurred that required referral to the US attorney general. Axios also reported that the review identified no administrative misconduct. Those are the watchdog's findings, rather than a court ruling on the project.

How the renovation's cost controls fell short

The Board did not obtain a comprehensive cost estimate at the start of the project or establish a maximum overall cost, according to the inspector general's findings reported by the Associated Press. A maximum cost could have shifted some exposure to rising prices to the contractor. The watchdog's criticism focuses on decisions available to the Board as the project was planned and managed, rather than treating inflation as a complete explanation for the increase.

The inspector general also identified a change in the design of the workplaces. In 2023, the Board moved from a plan with mostly open workspace to one with mostly closed offices. The change significantly delayed the design and delayed the Board's effort to seek a maximum cost ceiling, AP reported. Axios reported the watchdog's conclusion that the Fed had not taken available steps to better control costs and mitigate some construction increases.

What the $2.46 billion budget covers

The Federal Reserve Board lists a $2.46 billion approved budget for renovating the Eccles Building and the 1951 Constitution Avenue building. That budget is a different measure from the $2.018 billion construction-cost estimate AP reported for December 2024; the figures have different labels and reference points. The available accounts do not provide enough detail to calculate a like-for-like difference between them.

The Board says the buildings need replacement of aging plumbing, electrical, heating, ventilation, air conditioning and fire-suppression systems, along with work to address hazardous materials and accessibility. Some systems date from the 1930s. Its stated aim is also to consolidate operations and reduce the need to lease commercial offices elsewhere. That is a projected benefit of the renovation, rather than a saving the Board says it has already achieved.

The Eccles Building was built between 1935 and 1937, and the Constitution Avenue building dates from 1932, according to the Fed. Both are listed as historic properties in Washington, and the latter is on the National Register of Historic Places. The Board says preservation requirements can make this work more complex and costly than renovation without comparable historic constraints. That context does not remove the separate failures in estimating and controlling costs identified by the watchdog.

What the watchdog said about the disputed features

The watchdog found that water fountains, private elevators and marble facades criticized by Trump administration officials and Republican lawmakers were not significant drivers of the excessive costs, AP reported. The Fed says planned new water features were eliminated, original fountains are being restored, and no elevator is restricted to governors. It also says original exterior marble is being reused where possible, with replacement marble used where needed for preservation.

The Board says it scaled back or removed some rooftop and water features as the project changed. It also canceled a separate planned renovation of its New York Avenue Building in 2024 because construction costs were higher than expected. Those changes show how the Board describes its response to rising costs, while the inspector general's review addresses whether it used the cost controls available under the contract for the two-building project.

What follows the inspector general's report

Then-chair Jerome Powell requested a fresh inspector general review in 2025, according to the Fed. The Board says it had approved the renovation in 2017 and that its inspector general had conducted earlier renovation-related audits in 2021 and 2022. The new review therefore follows years of oversight and a request made before the latest findings were released.

AP reported that the Justice Department had investigated whether Powell committed perjury in Senate testimony about the renovation. A judge quashed subpoenas in March 2026, and the inquiry was dropped in April. US Attorney Jeanine Pirro said then that she would await the inspector general's findings before considering further action. The accounts available for this report do not establish what, if anything, the department will do after Wednesday's review.

Axios reported that current Fed chair Kevin Warsh welcomed the review in a letter and said the General Services Administration would take over project management. The inspector general's findings leave the Board with a practical task: managing the remaining construction against its approved budget and revised timetable. The reported management change describes the next step; the review does not establish that the cost or schedule problems have been resolved.