The Federal Reserve’s inspector general has concluded that the $2.5 billion renovation of the central bank’s headquarters broke no federal laws, despite cost overruns that pushed the project past its original budget.
The 121-page report, released Wednesday, found deficiencies in project management that drove up costs but no administrative misconduct or criminal wrongdoing. The IG’s evaluation also found no reasonable grounds to refer a case to the U.S. Attorney General under the Inspector General Act.
The investigation lasted more than a year and was requested by then-Fed Chair Jerome Powell, beginning in July 2025. The project was first approved in 2017 and is set to be completed in 2027. Costs have risen from $1.9 billion to nearly $2.5 billion across two buildings.
Project Management Deficiencies
The IG identified four areas causing cost surges and issued seven recommendations after interviewing Fed governors, senior Board officials, staff and contractors. The report found that cost overruns exceeded the rate of inflation.
Officials cited inflation as the main driver of cost increases, but the IG disagreed. The Board provided an assessment from two senior economists, who said general construction-cost indexes like the Producer Price Index are “misleading” for evaluating cost increases on a specific project.
The Fed did not obtain a construction cost estimate from its general contractor or share a stated cost limitation at the outset. As of July, the Board had not established a guaranteed maximum price — four years after construction began and after most construction awards had been issued.
The project faced several challenges during construction. The Fed has attributed cost increases to design changes after agency reviews, rising materials, equipment and labor costs, and unforeseen issues like soil contamination and asbestos.
White House Complaints
The White House had complained that features were “ostentatious” and noncompliant with approved plans. The IG did not find fault with those features.
The report’s findings come after a turbulent period for the project. In July 2025, Bill Pulte of the Federal Housing Finance Agency urged Congress to investigate Powell over his testimony, alleging deception without offering evidence.
Justice Department Investigation
The IG’s findings arrive alongside the closure of a broader probe. The Justice Department announced a separate investigation in January, with Powell revealing grand jury subpoenas in a video message about the project.
Those subpoenas were quashed by the U.S. District Court in Washington, D.C. The judge found they were a pretext to pressure Powell into voting to lower interest rates or resigning.
Warsh received a copy of the report and wrote to Horowitz Tuesday, saying the General Services Administration had been retained to advise the Fed on the project, reporting to both Warsh and the Board. Warsh said the Board would initiate a full audit to determine the value of unpaid services and pursue remedies, seeking reimbursement or credits for work not performed.
Two Audits by the IG
The IG has audited two Fed renovation projects with cost overruns. The first such audit also found no criminal misconduct.
The report’s release follows months of scrutiny. The IG’s evaluation found no reasonable grounds to refer a case to the U.S. Attorney General under the Inspector General Act.
What Comes Next
The Board has now initiated a full audit to determine the value of unpaid services. The audit will seek reimbursement or credits for work not performed.
The project remains on track for completion in 2027. Costs have risen from $1.9 billion to nearly $2.5 billion across two buildings.
The audit process will determine whether the cost increases were justified.
The Bottom Line
The IG’s conclusion is a relief for the Fed and Powell. No criminal misconduct was found, and the Justice Department investigation is closed.
The project’s cost overruns remain a concern. The IG found deficiencies in project management that pushed up costs, and the Board has yet to establish a guaranteed maximum price.
The report’s release is a step toward transparency. The audit will determine whether the cost increases were justified.
The project’s completion remains on track for 2027. The Fed has committed to transparency and accountability.
The IG’s report is available for review. The findings are a relief for the Fed and Powell, and the Justice Department investigation is closed.
“We did not identify administrative misconduct during our evaluation,” wrote Michael Horowitz, the central bank’s inspector general.
That line comes from the report itself. Pirro told CBS News Wednesday that she would review the report. CBS has asked her office if she plans to reopen a criminal investigation.
Where the paper stands
The paper backs neither the Fed nor its inspector general’s conclusion, instead backing a full independent investigation into whether the government spent taxpayer money wisely. The IG found deficiencies in project management but no criminal wrongdoing, and that finding closes the door on the Justice Department’s investigation. The paper wants answers beyond the IG’s self-assessment.
The IG’s report shows a pattern of agency control over its own oversight. The Fed’s inspector general investigated the Fed’s own project and found no wrongdoing. That arrangement puts the fox guarding the henhouse. An independent investigator outside the Fed’s orbit would bring fresh eyes and a firmer check on executive power.
The IG’s decision not to refer a case to the attorney general under the Inspector General Act is worth watching. The paper supports the IG’s conclusion that there were no reasonable grounds for referral, but the act itself exists to ensure independent oversight. A full independent investigation would test whether the IG’s judgment holds up against a broader, unbiased review.
Source material: “Fed watchdog finds no laws broken in $2.5 billion Fed renovation,” CBS News.
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