The Federal Reserve's inspector general concluded in a report released on Wednesday that management and oversight failures led to major cost overruns in the central bank's headquarters renovation, but found no basis for a criminal referral.

The Fed inspector general's report stated: "During our assessment, we never identified a reasonable basis to believe a violation of federal criminal law occurred that would require a referral to the U.S. Attorney General under the Inspector General Act."

The independent watchdog's findings may defuse one line of attack against former Fed Chair Powell. President Trump and other critics had accused Powell of mismanaging the project and misleading Congress about it.

Beyond finding that Powell bore responsibility for managing the project as the institution's head, the inspector general's report offered little concession to Powell's critics. Instead, it described in detail how the renovation of the Washington facilities saw costs balloon by about $1 billion over initial estimates as the Fed struggled with design changes and other issues.

Some critics alleged that Powell committed perjury when he testified about the project to the Senate in June 2025. The inspector general's office did not specifically evaluate that claim, but the report said the watchdog reviewed materials related to Powell's testimony. The report made no assertion of any misconduct related to that testimony.

The report noted that the Fed's Board of Governors was not involved in day-to-day decisions on the project.

The report said: "In fact, we would expect (the Board) to delegate day-to-day management of a large construction project."

Trump blamed the most recent rate hike on what he called a "hostile" Fed board, even though the decision was supported by Trump's newly appointed Fed chair, Kevin Warsh.

Fed officials and others in the central banking world had been anxiously awaiting the results of the review, which began in July 2025, knowing it could give Trump an opportunity to attack Powell again. Trump sharply criticized Powell over the matter last year. That fueled months of speculation that the president might use it as a reason to fire Powell.

In July 2025, the two inspected the construction site together, a tense visit captured on video. After a judge blocked a federal criminal investigation into the renovation, Powell completed his term as chair as planned.

Trump has long argued that the Fed should cut rates and said he would use that as a litmus test for his choice of chair. In an unusual video statement in January, Powell said the criminal investigation related to the renovation was a pretext to force rate cuts.

The Justice Department could reopen an investigation into Powell based on the new findings, or Warsh could ask him to resign. Powell remains on the Fed's Board of Governors as a governor, with a term running through January 2028.

The Fed board declined to comment on the report. Attached to the report was a letter from Warsh, who welcomed the findings and said the Fed would take steps to adopt the report's recommendations.

The investigation was led by Fed Inspector General Michael Horowitz. He was appointed by Powell in June 2025. Powell requested the investigation a month later.

Trump and his Republican allies claimed that Powell mismanaged the costly renovation and misled Congress during his Senate testimony in June.

The Fed's 2025 budget allocated $2.5 billion for renovating the historic Eccles Building that houses the Fed, about $700 million more than earlier estimates. The Fed attributed the higher costs to design updates made in consultation with other federal agencies, differences between estimated and actual costs for materials and labor, and unexpectedly harsh environmental conditions at the construction site.

Congress designed the Fed to be independent from the rest of the executive branch. The institution self-funds and manages its own budget.

Republican senators who attended Powell's testimony last year said they believed Powell did not commit a crime in his testimony.

"I was the one asking the questions," Republican Senator Tim Scott of South Carolina said in a Fox Business interview in February. Scott said he considered Powell incompetent, but "I don't think he committed a crime during the hearing."

Still, the president insisted the renovation issue involved "a crime." In December, U.S. Attorney for the District of Columbia Jeanine Pirro opened a criminal investigation into Powell and the Fed over the renovation.

Chief Judge James E. Boasberg of the D.C. Circuit revoked subpoenas that Pirro had issued to the Fed in March. The judge found there was evidence the subpoenas were intended to "harass and pressure Powell" over interest rates, but no evidence that Powell had done anything wrong.

Pirro agreed in April to drop the investigation, clearing the way for Warsh's confirmation. But Pirro said at the time that she was waiting for the inspector general's report and would consider reopening the matter.

"If the facts show it is necessary, I will not hesitate to reopen a criminal investigation," Pirro said. Pirro and the White House did not immediately respond to requests for comment on the inspector general's report.

In an interview before he was selected for the position, Warsh described the cost overruns as "infuriating." After his confirmation, Warsh said at a June news conference that he looked forward to reading the report and that his focus was on "how we can be good stewards of taxpayer money."

In a letter attached to the report, Warsh said he planned a full audit of the renovation and had asked the General Services Administration, which oversees other federal government building projects, to serve as project executor going forward.