Federal Reserve Chairman Kevin Warsh has appointed the General Services Administration to oversee completion of the central bank’s headquarters renovation, ordering an independent cost audit after an inspector general’s investigation documented extensive failures in management and senior oversight.

The watchdog found that the Fed repeatedly departed from contractual cost controls, allowed major spending decisions to proceed without requiring escalation to senior leadership, and reported the project as on track against budget and schedule targets that were repeatedly revised.

Warsh’s response establishes new executive responsibility for the project and directs reviews of spending and contractor performance, including potential recovery of payments for services not delivered.

“Effective immediately, GSA will serve as the Project Executive, reporting to the Board of Governors and to me as its Chairman,” Warsh wrote in a September 29 letter accompanying the report released Wednesday.

The inspector general found no reasonable grounds to believe federal criminal law had been violated and no violations of Board policy warranting an administrative misconduct finding. Its findings nevertheless document substantial shortcomings in the oversight framework operating during former Chairman Jerome Powell’s tenure.

About $2 billion of the $2.1 billion in construction work awarded through December 2025, or 95 percent, fell outside the project’s rules for escalation and senior stakeholder input, even as costs rose more than $1 billion above the initial budget.

Senior oversight officials relied heavily on the project team’s expertise. Multiple officials told investigators they did not want to micromanage or second-guess its decisions. The watchdog found that many had limited familiarity with important developments and material decisions.

The project had several oversight groups, but none of three principal internal bodies was explicitly responsible for monitoring whether it remained within a set budget and on schedule.

Nearly all the most consequential cost decisions fell outside the narrow categories requiring escalation. These included proceeding with mechanical, electrical, and plumbing contracts hundreds of millions of dollars above estimates and approving packages without at least three bids.

The watchdog also found that 36 of 40 budget or schedule assessments described the project as on track. Budget and schedule reference points were revised 13 times, limiting their usefulness in measuring performance.

Rather than establish a cost ceiling and manage spending against it, the Fed increased the budget as costs escalated, the report found.

Warsh directed the Fed to promptly complete negotiations for a Guaranteed Maximum Price. After four years of construction and more than $2 billion in awarded costs, that protection remained unfinished.

“Even at this stage, such controls are advisable in our effort to make wise use of public funds,” he wrote.

The Fed will engage an independent auditor to examine the accuracy and compliance of awarded costs. Staff working with GSA will establish fixed budget and schedule metrics.

The investigation also challenged the extent to which inflation explained the increases. Two mechanical, electrical and plumbing packages rose from an estimated $178 million in March 2022 to $539 million when awarded in 2023. Construction inflation over that period was about 16 percent.

The watchdog found that several management problems resembled deficiencies identified in earlier reviews of the Fed’s Martin Building renovation.

Warsh said the Fed and GSA would review contracts and determine the value of services not received.

“As necessary, we will seek reimbursement or project credits for any work paid for but not performed,” he wrote.

The corrective program follows Powell’s earlier assurance that the Fed had taken great care to ensure the project was carefully overseen. The inspector general’s findings contradict that assurance, documenting a system in which major spending decisions escaped required senior review and oversight bodies lacked clear responsibility for controlling costs.

The renovation became a political flashpoint in June 2025, when Senate Banking Committee Chairman Tim Scott questioned Powell about its costs and design features. The Trump administration subsequently intensified its scrutiny, with Office of Management and Budget Director Russell Vought challenging Powell’s management of the project. Trump toured the construction site with Powell the following month and repeatedly criticized the spending as he also pressed the Fed to lower interest rates.

The dispute escalated in January 2026, when Powell disclosed that federal prosecutors had served the Fed with grand jury subpoenas concerning the renovation and his congressional testimony. Powell described the investigation as an attempt to pressure the central bank over monetary policy. A judge later blocked the subpoenas, and prosecutors suspended the investigation in April pending the inspector general’s review. Following the report’s release Wednesday, Trump renewed his criticism, blaming Powell for the overruns and demanding his resignation from the Board.

“This is Jerome Powell’s fault, and he should be forced to resign, IMMEDIATELY! If he doesn’t resign, he should be sued, at the highest level, by the United States Government, for either corruption or incompetence, both of which are completely unacceptable,” President Trump wrote in a post on Truth Social.

Warsh’s letter stopped short of assigning personal blame to Powell. It committed to implementing all seven watchdog recommendations and establishing permanent budgeting, performance, and oversight controls to prevent similar failures.
Some former Fed staff members see the OIG report as a stinging indictment of Powell’s leadership.

“Truman’s motto was ‘The Buck Stops Here.’ At Powell’s Fed, no one knew where the buck stopped and so it just got passed around,” one former staffer said.