The Federal Reserve's inspector general determined management and oversight failures contributed to major cost overruns in the central bank's headquarters renovation, but found no grounds for a criminal referral, it said in a report released Wednesday.

"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 in accordance with the Inspector General Act," the report from the Fed's inspector general states.

The independent watchdog's findings could defuse one line of attack against former Fed Chair Jerome Powell, whom President Donald Trump and other critics accused of mismanaging the project and misleading Congress about it. And yet Trump has been willing to pursue Powell and other members of the Fed's board on thin evidence. He has called the board "hostile" to his new appointee, Chairman Kevin Warsh, even though Warsh voted to raise interest rates, along with the rest of the board.

Trump has consistently called for lower interest rates, under both Powell and Warsh.

Powell remains on the Fed's board, much to Trump's frustration. Powell said in April he would stay on a governor after his term as Fed chair ended "until this investigation is well and truly over, with transparency and finality." Powell can remain on the board through January 2028.

The IG's report cedes little to Powell's critics beyond his responsibility for management of the project as head of the organization. Instead it details a renovation project of the Washington facility that ballooned in cost by roughly a billion dollars from initial estimates as the Fed struggled with design changes and other issues.

The report finds the Fed estimated in 2020 that the project would cost $1.3 billion; as of August 2026, the board-approved budget has soared to $2.4 billion. Construction costs alone have risen by $960 million.

The Fed's board has attributed some of those costs to inflation. That was part of the problem, the IG found, but while overall producer price inflation rose 16% during the renovation, some costs on the project rose by far more. Plumbing and heating, ventilation and air conditioning costs rose by 223%, for instance.

The IG found that the Fed failed to enforce a guaranteed maximum price for the project, and designed a process that didn't result in rising costs being escalated to the attention of senior leadership. A bevy of committees was responsible for the building project.

Some critics have alleged Powell perjured himself in testifying to the Senate about the project in June 2025. The IG's office didn't specifically set out to assess that claim, but the report said the watchdog had reviewed materials related to Powell's testimony. The report makes no claims about any misconduct related to that testimony.

Trump has long argued the Fed ought to lower interest rates and said he would apply that litmus test to anyone he chose for chair. Powell said in January in an extraordinary video statement that a criminal investigation related to the renovation was a pretext to force him to lower interest rates.

The Fed's Board of Governors declined to comment on the report. The publication includes a letter by 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.

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

Republican senators who were present for Powell's testimony last year have said they don't believe he committed a crime in his testimony. 

"I was the one asking the questions," Sen. Tim Scott, R-S.C., said in an interview on Fox Business in February. Scott said he found Powell to be inept, but "I do not believe that he committed a crime during the hearing."

Scott said in a statement Wednesday that he welcomed the new report. "Inflation does not change the Fed's responsibility to manage its resources prudently and be accountable to Congress," he said.

The president has insisted that there was "criminality" involved in the renovation problem. 

In December, U.S. Attorney for the District of Columbia Jeanine Pirro opened a criminal investigation into Powell and the Fed over the renovation issue. Chief Judge James E. Boasberg of the D.C. Circuit in March quashed subpoenas Pirro had issued to the Fed. The judge found there was evidence that the subpoenas were intended to "harass and pressure Powell" over interest rates, but no evidence of any wrongdoing on Powell's part. 

Pirro in April agreed to drop the investigation to clear the way for Warsh's confirmation.

But Pirro said at the time she was awaiting the inspector general's report and would consider reopening the matter. 

"I will not hesitate to restart a criminal investigation should the facts warrant doing so," Pirro said. 

Pirro's office said Wednesday that it was reviewing the report.

"Today's IG report reinforces the gross mismanagement that President Trump has repeatedly highlighted by the Federal Reserve's prior leadership," White House spokesman Kush Desai said via email. "Financial markets and hard-working Americans alike deserve a Federal Reserve with competence and accountability."

After the IG's report, Pirro and the Department of Justice "have no basis to restart the President's witch hunt against former Fed Chair Jerome Powell," Sen. Elizabeth Warren, D-Mass., the ranking Democrat on the Senate Banking Committee, said in a statement.

The report underscored the need for more transparency at the Fed, Warren said.

Warsh described the cost overruns as "outrageous" in an interview with Fox before being selected for the job. After his confirmation, at a press conference in June, Warsh said he was looking forward to reading the report and said his focus was on "what we can to be good stewards of taxpayer money."

In his letter with the report, Warsh said he plans to conduct a full audit of the renovation and that he has asked the General Services Administration, which oversees other federal-government building projects, to serve as the project executive going forward.