Work on the Diana, Princess of Wales Memorial Fountain was poorly managed leading to spiralling costs, MPs say.
The fountain opened nearly a year late in July 2004
The £5.2m monument, in London's Hyde Park, reopened last May after closing because of blockages and injuries.
The fountain, which first opened in July 2004 - £2.2m over budget - was ill conceived, said Chairman of the Public Accounts Committee, Edward Leigh MP.
The government said early teething problems had now been resolved and the fountain was extremely popular.
The Royal Parks Agency, which manages the fountain, now pays £250,000 a year to maintain the site.
'No clear accountability'
The MPs' report said: "The problems with the fountain reflected basic project management failures.
"The fountain was a small-scale project, yet there were multiple stakeholders whose roles, responsibilities and accountability for the finished result were not clear.
"Nor were there clear plans for managing the project risks."
The fountain has been plagued with problems since first envisaged in September 1999.
Delayed by a year because of disagreements over what it should look like, the fountain finally chosen - US artist Kathryn Gustafson's 80m by 50m oval stone ring - shut within three days of opening because leaves blocked the drains.
It closed for a month three weeks later and new safety rules were imposed when three visitors slipped and hurt themselves while paddling.
Mr Leigh said: "This so-called water feature will literally be a drain on the resources of the Royal Parks Agency for years to come.
He added: "There are lessons aplenty here for the proposed project to erect a memorial to Queen Elizabeth, the Queen Mother."
In January, Buckingham Palace announced plans for a £2m memorial to be placed off The Mall, in London, which will be maintained by the Royal Parks.
But in a statement, the Department for Culture, Media and Sport and the Royal Parks said that while the fountain had early problems, these had now been resolved.
It added that it was now one of the UK's top visitor attractions - with 800,000 people visiting it since it reopened in May 2005.
The statement added: "The memorial is extremely popular. It is a fitting tribute to the Princess of Wales, a place of remembrance and contemplation for the public.
"The costs of building the memorial reflect that it is built to last, of high quality Cornish granite that will still be standing in 200 years."
It added that a new management team was now in place which had made significant improvements to the way the memorial was managed and visitor access.