The Federal Reserve's independent watchdog said Wednesday it found no evidence of administrative misconduct and no grounds to refer anyone for criminal prosecution over the renovation of the central bank's headquarters.

The report, by the Fed's office of the inspector general, removes the last formal threat to former Fed chair Jerome Powell after the project became a vehicle for the Trump administration's potential legal campaign against him.

But the 120-page report was nonetheless sharply critical of how the Fed managed the renovation of two historic buildings, finding that its oversight framework was insufficient for a project of its size. Construction costs have swelled to around $2.4 billion, up from an estimate of $1.3 billion in 2020, according to the report.

What this means for the Fed

Powell announced in January that U.S. prosecutors were investigating him over testimony he made to Congress last year about the building renovation. He denied any wrongdoing and instead cast the probe as part of the Trump administration's ongoing pressure campaign to lower interest rates.

When the Justice Department said in April it had closed the criminal investigation of Powell, it told Sen. Thom Tillis (R., N.C.) that the case could be revived only by a criminal referral from the Fed's inspector general, an assurance Tillis made public and that cleared the way for Powell's successor Kevin Warsh to be confirmed as Fed chairman in May.

"At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred," the report said. "Further, while our report outlines deficiencies in the management of the renovation project" the report "did not identify administrative misconduct."

What the report found

The findings give something to both sides of a year-long fight, but aren't likely to satisfy anyone. Administration officials who decried the renovation as fiscal mismanagement now have a federal watchdog largely in agreement. But in addition to finding no evidence of misconduct, the report concluded the design features that the Fed's critics highlighted as evidence of wasteful spending didn't drive the overruns.

In clearing Powell of wrongdoing, including making false representations to lawmakers, the report delivered the finding that matters legally for Powell alongside an unflattering account of the institution he ran. The report faulted the Fed's facilities services team for not having done more to flag rising costs and construction delays to the Fed's board of governors, whose responsibilities include setting interest rates, regulating banks and overseeing the nation's payment systems.

What else the report faulted

The inspector general said the Fed board's governance and oversight framework was insufficient to manage the risks of a project of that size and complexity. Investigators faulted the Fed on several fronts, including not establishing a project cost ceiling or taking other steps that would have given its outside construction managers more incentive to hold down costs, particularly as rising inflation contributed to building cost overruns.

For example, the report said that after construction began in 2022, the board didn't obtain an updated cost estimate from its construction manager until this January, after it had already awarded more than $2 billion in work. Investigators were concerned by the delay.

It also challenged the premise that rising materials costs were largely to blame for certain cost overruns. Major mechanical, electrical and plumbing items ended up running about $500 million above an initial $200 million estimate in 2022, well ahead of what inflation could explain. The report didn't make any effort to determine whether the cost of the project was reasonable.

The renovation is scheduled for completion next year.

How the Fed responded

Warsh said in a letter Tuesday to the inspector general that he had earlier asked the head of the General Services Administration, the agency responsible for managing federal workspaces, to lead an outside review of the renovation. Effective immediately, Warsh said, the GSA would serve as the project executive and report to him and the board. "Working together, we will ensure that the balance of the project is managed to the highest standards and is finished properly," Warsh wrote.

He accepted all of the inspector general's recommendations. "If any arm of government should be showing vigilance in cost control, it is the nation's central bank," he wrote.

What does this mean for Powell?

In April, weeks before his term as chairman ended, Powell made the unusual move of announcing he would stay on as a governor and decide his departure by what he judged best for the institution-a standard broader than the investigation itself. Powell's remaining term runs through January 2028.

Powell had earlier said that he wouldn't leave the board until the criminal investigation was "well and truly over, with transparency and finality." The inspector general's report may settle the legal question without resolving the broader political one.

Trump administration officials have said they hope Powell will step down from the board later this year if the inspector general's findings give prosecutors no basis to reopen the case.

With Warsh's arrival, White House pressure has shifted away from the chairman. After Warsh led the Fed to raise rates on Sept. 16, Trump and other White House advisers described the chairman as saddled with a hostile board. The White House hasn't abandoned its effort to remove governor Lisa Cook. Powell's decision about whether to surrender his seat would determine whether the White House gets another vacancy on a board it has spent two years pressing to cut rates.

The chronology

The overhaul of the Eccles Building and the adjacent 1951 Constitution Avenue Building was approved by the Fed's board in 2017, when Powell was the governor overseeing the board's administrative matters. The Fed is self-financed, which means the project is financed by the central bank's own earnings.

Statements that Powell made about the renovations at a June 2025 hearing became the basis of accusations by senior White House officials that the Fed chair hadn't been truthful. Powell said the building's high-gloss features had been exaggerated in some reports or didn't reflect the most recent building plans.

As the political firestorm over the building renovations escalated in July 2025, Powell asked the inspector general, Michael Horowitz, to examine how the project was planned, budgeted and managed. Trump toured the building that month and seemed to lose interest in the matter, declaring that he didn't want to play Monday morning quarterback.

But the testimony resurfaced as the basis of an investigation opened by Jeanine Pirro, the U.S. attorney in Washington, when her office sent two subpoenas to the Fed in January. Republican senators objected to the investigation, saying they feared it was a contrived effort to compromise the Fed's independence.

A federal judge quashed the subpoenas in March, writing that the investigation appeared designed to harass and pressure Powell. The report said Pirro's office reached out to the inspector general's office in April, with representatives of both offices meeting about one week before Pirro said she would suspend her probe and rely on Horowitz's findings.

A spokesman for Pirro said Wednesday she was reviewing the report.

The Watchdog

The Fed's inspector general is chosen by the Fed chair-an arrangement some senators have sought to change-which means the office that spent the past year examining Powell's project now reports to his successor.

Horowitz took the Fed post in June 2025 after 13 years as inspector general at the Justice Department, where his reports on the FBI's conduct in the 2016 election were cited approvingly, at different moments, by both parties.