The incident is one of many included in the latest US government audit of reconstruction spending by Iraq's Coalition Provisional Authority in the South Central region, which includes the cities of Najaf and Karbala and al-Hillah.
The 42-page report by the US Special Inspector General for Iraq Reconstruction found problems with 907 contracts and more than 1200 micro-purchase contracts worth $88.1 million.
Many of the contracts lacked documentation, were not properly authorised or competitively awarded, and across the board officials failed to keep track of where the materials they paid for actually went, it said.
Cash was stolen during insurgent raids, but not reported as such.
One US military assistant gambled away $40,000 while accompanying the Iraqi Olympic team to the Philippines; and tens of millions of dollars went into and out of the region's cash vault with no record-keeping whatsoever, it found.
Officials paid for weapons but kept
no records of who received them
Four people have already been arrested on fraud charges as a result of the inspector general's audits and spokesman James Mitchell said more arrests were expected.
The report was one of three audits released by the inspector general on Tuesday, with four more due this week.
Next week, the office will release a comprehensive quarterly update on the troubled Iraq reconstruction effort.
In the case of the elevator crash at al-Hillah hospital, the contractor had been paid in full, even though 20% of the work was not complete, which meant there was no way to hold the contractor accountable.
More than 160 vehicles worth about $3.3 million disbursed by the South Central region could not be traced because there was no proper documentation, the report said.
"There is no way to verify this project was ever completed, because we don't even know where exactly in Ramadi it was supposed to take place. It appears the contractor was paid"
Internal US report
Officials also paid for ammunition and weapons to be used by personnel working for the reconstruction effort, but did not keep detailed records on who received the weapons, it said.
Another project, a $473,000 contract to install internet service in Ramadi was cancelled because officials realised that they could not oversee it, despite payments to the contractor.
In an internal document, dated April 2005, officials said: "There is no way to verify this project was ever completed, because we don't even know where exactly in Ramadi it was supposed to take place. It appears the contractor was paid."
The report cited many cases of lack of oversight over cash, noting that one contracting officer kept $2 million in cash in a safe in his office bathroom, while a paying agent stashed $678,000 in an unlocked cupboard in his office.
The inspector general recommended continued efforts to document and authorise all contracts, and that the US ambassador to Iraq take steps to recover more than $571,000 that was overpaid on at least 11 contracts.