Fed watchdog finds mismanagement but no criminal violation in $2.4bn renovation

The Federal Reserve’s inspector general has found broad mismanagement in a $2.4bn renovation project but no evidence requiring a referral for criminal prosecution. A 120-page report said the Fed’s Board of Governors and staff failed to secure a comprehensive initial cost estimate or establish a maximum overall price. It said the board repeatedly departed from cost-management provisions in executing the contract.

Construction costs for the renovation of two Fed buildings rose from an estimated $921m in February 2020 to $2.018bn by December 2024. Completion, originally planned for mid-2024, is now expected in December 2027. The inspector general said inflation, asbestos remediation and demands from review agencies contributed to the increase, but did not fully explain it.

A change in 2023 from mostly open workspaces to mostly closed offices caused a significant design delay and postponed efforts to set a cost ceiling. The report said features criticised by former President Donald Trump and Republican lawmakers, including water fountains, private elevators and marble facades, were not major drivers of the cost growth. Instead, it described contract and management decisions that effectively created a reimbursement-based arrangement.

The renovation became part of political pressure on the Federal Reserve and former chair Jerome Powell. Trump renewed his call for Powell to resign after the report was released. Powell remains a Fed governor, while a previous Justice Department investigation into whether he committed perjury was dropped after a judge quashed subpoenas.

Current Fed chair Kevin Warsh said the General Services Administration would assist with oversight. The Fed also plans to appoint an independent auditor, review contracts and seek reimbursement for work that was paid for but not completed.