Federal Reserve Watchdog Reports No Criminality in Renovation Project

The Federal Reserve Board Building is undergoing a major renovation, with work expected to be completed in late 2027. The Federal Reserve’s independent watchdog stated on September 30, 2026, that it found no reasonable grounds to believe there was a violation of federal law in a multibillion-dollar renovation project that had drawn criticism from President Donald Trump and scrutiny from federal prosecutors. However, the central bank’s board “had not effectively executed” a contract and its cost-management provisions, according to a 120-page report from the Office of the Inspector General for the Board of Governors of the Federal Reserve System. Despite over $2 billion in awarded construction costs and four years of construction, the Fed board had “not established a guaranteed maximum price” for the project and had set up “insufficient” internal project governance for a project of such “magnitude and complexity,” the report stated. The investigation concluded without identifying any administrative misconduct or reasonable grounds to believe a violation of federal criminal law had occurred. The report noted that several design components of the renovation, including the building's marble and water features, “did not materially contribute to subsequent cost increases.” The removal of four water features from the renovation plans would not result in significant cost savings, as landscaping and other costs would be needed to replace the fountains, according to one official. Cost overruns were attributed to factors such as inflation, limited subcontractor bidding, substantial design changes, and challenging site conditions. The report highlighted that a shift from a design focusing on closed offices to open workspaces after construction began exemplified ineffective project management, extending the project’s duration and exposure to inflationary pressures. In a letter to Inspector General Michael Horowitz, Fed Chairman Kevin Warsh expressed agreement on the need for efficient and transparent completion of the work, stating that the General Services Administration (GSA) would take over as the project executive. The GSA oversees federal office buildings, technology services, and real estate. The renovation was a point of contention during a Senate hearing on June 25, 2025, where Senator Tim Scott questioned Fed Chair Jerome Powell about the project, accusing him of spending billions on lavish renovations. Powell denied these accusations, clarifying that there were no new marble finishes or special elevators as claimed. Following the inspector general's report, Scott welcomed the findings but emphasized the Fed's responsibility to manage its resources prudently. The Federal Reserve System is self-funded through fees for services and interest on its bond portfolio, not taxpayer money. Powell defended the project's oversight, stating it was approved by the Board of Governors in 2017. The Trump administration maintained pressure on Powell regarding the renovation, with Trump visiting the construction site on July 24, 2025, and suggesting the project's costs had increased. Powell refuted Trump's claims, indicating that the president's estimates included costs from a previously completed project.