Fed watchdog finds no grounds for criminal referral but faults renovation oversight

The findings leave two accountability questions on separate tracks. The inspector general found no reasonable grounds to refer a suspected federal criminal-law violation to the attorney general and found no administrative misconduct. It also issued seven recommendations to address management failures that could affect what the Fed ultimately spends.

What the criminal finding does and does not mean

The inspector general’s review began in July 2025 at the request of Jerome Powell, who was then Fed chair. It examined the Board’s oversight and costs as well as Powell’s renovation-related congressional testimony. The testimony had been part of a Justice Department investigation into whether Powell committed perjury.

The inspector general found no reasonable grounds to believe a federal criminal-law violation had occurred that required referral to the attorney general. It separately reported finding no administrative misconduct. Neither finding is a court verdict, and neither erases the report’s criticism of how the Board ran the project.

The U.S. attorney’s office said it closed its criminal investigation on April 24 while the inspector general’s inquiry was underway, according to the report. Following Wednesday’s release, U.S. Attorney Jeanine Pirro’s office said it would review the findings. The supplied reporting does not establish that the investigation has been reopened.

The renovation has also figured in a political dispute over Powell and Fed interest-rate policy. CBS News reported that President Donald Trump asked Attorney General Todd Blanche to study the inspector general’s report and decide what to do. That request does not change what the inspector general found or establish any subsequent prosecutorial decision.

The renovation itself has a stated purpose beyond that dispute. The Fed says the work on the two historic buildings is intended to replace outdated systems, address hazardous materials, modernize the space and improve accessibility. The watchdog’s criticism concerns how the Board managed that work and its price, not whether the buildings needed work.

Where the renovation’s costs rose

The report separates the overall project budget from its construction component. The Board’s construction budget increased from $921 million in February 2020 to $2.018 billion in December 2024. In January 2026, the construction manager submitted a proposed construction cost of $2.135 billion; that proposal is not another figure for the full project budget.

The Fed’s project FAQ also lists a Board-approved budget of $2.46 billion for renovating the two buildings. It does not give that figure the same budget date as the inspector general’s December 2024 figure, so the two should not be presented as competing estimates for one dated measure. Nor does a budget establish the final cost.

Inflation, limited subcontractor bidding, substantial design changes and difficult site conditions all contributed to higher construction costs, the inspector general found. The report also says stronger project management and contract execution could have reduced some of those effects. External pressures, in other words, were part of the explanation but not the whole explanation.

One Board decision changed the project’s interior plan from mostly open workspaces to mostly closed offices in January 2023. The inspector general said the change delayed completion of the interior design by 21 months. The report does not assign the entire project’s cost increase to that decision.

The watchdog also examined features that had drawn attention in the dispute over the renovation. It found that marble, water features and a garden terrace did not materially contribute to subsequent construction-cost increases. Its account instead points to broader construction pressures and weaknesses in decisions about pricing, design and oversight.

The schedule slipped as well. The Associated Press reported that the project was originally slated for completion in mid-2024 and that construction completion was then expected in December 2027. An expected completion date is not a final one; the report does not settle what the finished project will cost.

How cost controls and oversight fell short

The Board selected a construction-manager-at-risk arrangement, a contracting approach intended to help manage construction cost and schedule risks. A central protection was the opportunity to establish a guaranteed maximum price for the project. The inspector general found that the Board instead relied on 84 limited-scope price packages without securing an overall maximum.

As of July 2026, the Board still had not set that project-wide price, although construction had begun four years earlier and most construction awards had been issued. The watchdog concluded that the Board did not effectively manage the contract or consistently use its cost-control provisions. The package-by-package approach did not provide the cost certainty and transfer of risk the contract was meant to deliver.

The consequences of limited bidding were visible in four packages for mechanical, electrical and plumbing work. Together, their prices exceeded the design firm’s 2022 estimates by nearly $500 million. Three of the four packages drew fewer than three bids, and the inspector general said the Board took no additional steps to independently validate their costs. A gap between an estimate and later prices does not, by itself, establish that the Fed overpaid; the finding is that the Board lacked an adequate check on those prices.

The Board’s internal reporting presented another problem. Oversight bodies received project updates but lacked clearly defined responsibility for watching costs, the inspector general found. Project dashboards continued to show overall status as on track even as costs increased and the completion date slipped, because the benchmarks were revised to reflect newer budgets and schedules.

That method could tell officials how the project was performing against its latest plan while obscuring how far it had moved from earlier plans. It also makes the inspector general’s finding about governance more consequential than any single price package: decision-makers need a clear record of both current progress and the changes that brought the project there.

The weaknesses were not entirely new to the Fed’s building projects. The inspector general said earlier reviews of the Board’s Martin Building renovation had identified problems involving planning, estimates, cost controls and oversight. Some issues recurred on the Eccles–1951 project despite the Board’s closure of earlier recommendations.

What accountability comes next

Fed Chair Kevin Warsh concurred with the inspector general’s findings and recommendations on the Board’s behalf, according to the report. He said the General Services Administration had been retained to advise on the project and that the Board would conduct a full construction audit, review services it had paid for and pursue appropriate remedies, including reimbursement or credit for work paid for but not performed.

Those are planned steps, not audit results or recovered funds. The inspector general’s seven recommendations call for corrective action, and its office says it will follow up with the Board quarterly. The public test will be whether those steps strengthen oversight while construction continues and whether the audit identifies costs the Board can recover.

Sen. Tim Scott, chairman of the Senate Banking Committee, said the absence of criminal wrongdoing did not relieve the Fed of its responsibility to control costs and answer to Congress, according to AP. His distinction tracks the report’s central point: criminal-law findings and institutional accountability answer different questions.

For now, the inspector general has documented failures in contract management and cost oversight, while the final bill remains unknown. The Board’s promised audit and the watchdog’s quarterly follow-up will show what the Fed changes—and whether any of the money already paid can be recovered.