The BBC project to replace and expand the external set of EastEnders will now cost £27m more than originally planned.
The original 2015 forecast for the E20 scheme was £59.7m, but the revised budget is now £86.7m.
A National Audit Office (NAO) report concluded that "the BBC will not be able to deliver value for money... in the way that it envisaged in 2015."
The BBC said the project was "large" and "complex", adding that there had been "challenges on the way".
The original completion date was pushed back from October 2020 to May 2023.
Amyas Morse, head of the NAO which scrutinises public spending for Parliament, said: "Despite recent project management improvements, E20 is late and over budget.
"We believe that the planned benefits are still broadly achievable, but given the high risk nature of E20 it will need close scrutiny until it's finished."
The NAO said that "some of the reasons for the delays and cost increases could have been addressed earlier by the BBC".
It took aim at the early planning stage of the project, which "resulted in the BBC underestimating aspects of complexity, cost and risks of its approach".
The original external EastEnders set at the BBC's Elstree Centre in Hertfordshire - which includes Albert Square - dates back to the soap's beginning in 1984.
It was only supposed to be used for two years but has lasted for 34.
Improvements made
"The show remains one of the BBC's flagship programmes and yet is filming from a set that is no longer fit for purpose," the BBC said in a statement.
"The new set will be suitable for HD filming for the first time and extend Walford to better reflect modern East End London.
"It's a large, complex project which has already delivered many other vital improvements at BBC Elstree Centre but like any building work of this scale there have been challenges on the way, including construction market issues beyond our control and from working on a brownfield site.
"As the NAO recognises we've already made improvements and are keeping the project under close scrutiny."
The NAO acknowledged that the BBC had faced issues such as asbestos and obstructions in the ground which could not have been foreseen when the project was first planned.
Inflation had also risen higher than expected in the construction industry - though the NAO said inflation "had a greater impact than it would have done had the programme been completed without any delays".
The NAO said that the BBC "had made many improvements to the programme" in the last 18 months.
The so-called "front lot", which is the replacement for the existing set, will be finished by 2021 - but the "back lot", which will include new Walford outdoor locations, will take the project up to the new May 2023 forecast.
The front lot is being rebuilt using real brick structures rather than facades, as is the case now.
E20 will also include new edit suites, boilers and electrics.
This is not the first time E20 has had scheduling problems. In October 2017, the original August 2018 completion date was put back to October 2020.
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