Fed audit flags soaring HQ renovation costs

Fed audit finds renovation costs soared, no criminal case

The Federal Reserve’s inspector general found major management failures and a sharp budget overrun in the renovation of the central bank’s headquarters, but no evidence that would warrant criminal referral.

HABER.NET · Newsroom • 1 October 2026 16:30 • 2 min read AI

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What were the main findings of the Fed report?

The Fed report released on Wednesday said management and oversight failures in the renovation of the headquarters in Washington led to a major cost increase. However, the inspector general said its review found no reasonable basis for a criminal referral. The findings also brought back into focus not only the institution’s budget management but also the political tensions around the Fed’s independence and interest-rate policy.

No referral to prosecutors

The report found no grounds for a criminal referral against former Fed Chair Jerome Powell. By contrast, US President Donald Trump said after the report that Powell should at least leave the Board of Governors and asked Attorney General Todd Blanche to review the text.

Why did costs rise so much?

According to the audit, the project was estimated at $1.3 billion in 2020. As of August 2026, the board-approved budget had risen to $2.4 billion, with construction costs alone increasing by $960 million.

The report listed the main reasons for the increase as follows:

Design changes and revisions to the project scope
Failure to apply a guaranteed maximum price for the project
Process shortcomings that prevented rising costs from being brought to senior management in time
Beyond inflation, unusual price spikes in certain technical items

Fed management attributed part of the cost increase to inflation. The inspector general acknowledged that effect as well; while producer prices rose 16% during the renovation period, plumbing and heating-ventilation-air conditioning costs jumped 223%, showing the problem could not be explained by general price pressure alone.

What could the report mean for markets and governance?

The report did not include any separate finding of misconduct regarding Powell’s 2025 testimony in the Senate. A criminal investigation previously opened by the US Attorney’s Office for the District of Columbia had been closed; the prosecutor’s office said it was reviewing the new report again.

Current Fed Chair Kevin Warsh said the report’s recommendations would be implemented, that a full-scope audit of the renovation would be launched, and that support would be sought from the General Services Administration, which manages federal building projects, as the project’s executor. The Fed Board of Governors did not comment on the report. The picture suggests that as political pressure over rate cuts continues, the Fed’s resource management and institutional accountability will remain on the financial agenda.

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