Federal Reserve Renovation Mismanaged But No Criminal Acts Found, Watchdog Reports
An internal review found significant mismanagement in the Federal Reserve's building renovation project, but no evidence of criminal wrongdoing as previously alleged.
The Federal Reserve's internal watchdog determined that the agency broadly mismanaged an extensive building renovation project, but the investigation did not uncover any criminal violations as had been alleged by Trump administration prosecutors.
The Fed's inspector general stated in a 120-page report that a series of missteps by the Board of Governors led to inflated costs for the $2.4 billion renovation. The board failed to secure a comprehensive cost estimate at the project's outset and did not establish a maximum overall cost, a measure that could have shifted inflation-related price increases to the building contractor.
"Our review found that the Board has not effectively managed and executed its ... contract and repeatedly deviated from its cost-management provisions," the report stated. Former Fed Chair Jerome Powell had requested the inspector general's review of the renovation project last year.
The building renovation became a significant point of contention during the Trump administration's efforts to pressure the Fed into lowering its key interest rate. Then-President Donald Trump visited the construction site in July, where Powell addressed Trump's estimates of the project's costs.
Following this, the Justice Department under the Trump administration initiated an investigation into whether Powell had committed perjury during testimony before a Senate committee regarding the renovation. That investigation was dropped in April after a judge quashed subpoenas issued by the U.S. Attorney for the District of Columbia. At that time, the U.S. Attorney indicated an intention to await the inspector general's findings before deciding on further action.
"At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the U.S. Attorney General," the inspector general's report concluded.
According to the report, the cost to renovate two Fed buildings more than doubled from an initial estimate of $921 million in February 2020 to $2.018 billion by December 2024. The construction is now expected to continue until December 2027, significantly past its original mid-2024 completion target.
Some features that drew criticism from the Trump administration and Republican members of Congress for being luxurious, such as water fountains, private elevators, and marble facades, were not major contributors to the project's excessive costs. Instead, the inspector general cited a design change in 2023 by the Fed, which shifted from a predominantly open workspace to one with mostly closed offices, as a cause for significant delays in the project's design phase. This change also postponed the Fed's ability to seek a maximum cost ceiling for the project at that time.