The Special Inspector General for Iraq Reconstruction said the government here initially agreed to take over the projects but the transfers stalled about a month after Prime Minister Nouri al-Maliki took office in May 2006.
That forced U.S. officials to turn the reconstruction to local officials or to commit more money to keep them running.
The report, which was dated Wednesday, found that no completed projects had been transferred to the national government since June 30, 2006. It said 2,362 completed projects valued at $5.3 billion were pending as of May 31.
By contrast, 435 completed projects worth $501 million had been transferred between April 23, 2006, and June 30, 2006, according to the report.
U.S. officials have, however, formally handed 1,576 projects worth $2.6 billion to local officials despite concerns they may not be able to properly finish and run the projects.
The Washington-based agency warned that delays in transferring the projects meant less collateral for the Iraqi government in seeking loans "and could result in additional sustainment expenses for the U.S. governmental agencies that completed the projects."
The report singled out Finance Minister Bayan Jabr, who it said had changed government conditions for the transfers, effectively halting the process at the national level in July 2006.
Jabr and other Finance Ministry representatives could not be reached for comment, and al-Maliki's spokesman Ali al-Dabbagh said he had no information about the report.
A senior adviser at the Iraqi Planning Ministry, which is responsible for overseeing reconstruction programs, said the government was willing to take over completed projects unless they had immediate budget implications that would need to be addressed.
"We are in need of these projects," said the adviser, Faik Abdul-Rasool. "If it is completed, we would be very happy to receive that project and start running it unless it has a financial implication on the budget, then this would be delayed."
The assessment was the latest piece of bad news for a U.S.-led war and rebuilding effort that has already cost nearly $400 billion.
Investigators said in an audit three months ago that U.S. efforts to rebuild Iraq are so beset with daily violence, corruption and poor maintenance that Iraqis will not be capable of managing reconstruction anytime soon.
Where U.S.-funded projects are built and handed over to the Iraqis, they "are not being adequately maintained," according to the April audit by the inspector general's office.
Sustainability is an important factor in explaining the slow progress in a sectors such as oil, gas, water and electricity.
A $90 million rehabilitation of the Doura power plant failed because local employees didn't know how to operate the turbines and used the wrong fuel, reports CBS News correspondent Allen Pizzey.
Lt General Ray Odierno said his troops had a plan in place for Iraq's Diyala Province, but ultimately, it came down to Iraqi forces being able to take over from American troops.
"That's why ultimately our strategy needs to be a deliberate one which allows us to maintain people here to help them over a longer period of time," Odierno said. "This will not be fixed in six months, one year, two years or three years."