President George W. Bush’s hopes of building a viable nation in Afghanistan fell victim not to the ongoing Taliban insurgency but rather to endemic corruption that the U.S. fed, pumping tens of billions of dollars into a society with a government ill-equipped to handle it, according to a watchdog report released Wednesday.

At its worst, American taxpayers’ money intended to rebuild the country went to corrupt government officials who siphoned it to criminals, drug traffickers and even the insurgents, concluded John F. Sopko, the special inspector general for Afghanistan reconstruction (SIGAR).

Corruption also sapped Afghans’ confidence in their government, leading some to instead support the Taliban and further boosting the insurgents, Mr. Sopko said.

The Obama administration did a better job of recognizing the dangers of corruption — but even there, the State Department under Secretary Hillary Clinton failed to approve the U.S. Embassy’s anti-corruption strategy.

Mr. Sopko, in a speech to the Carnegie Endowment for International Peace, said the lessons go well beyond Afghanistan, to anywhere that the U.S. is trying to pump money to help a struggling country.

“If you expect that the United States will continue to be drawn into overseas contingency operations — whether in a conflict setting like Afghanistan or in a noncombat contingency like our response to Haiti’s devastating 2010 earthquake — we need to know what we can do to improve execution and outcomes in the future in the face of the corruption threat,” he said.

The Pentagon, which handled many of the reconstruction duties in Afghanistan, declined to comment on the damning report.

The State Department, which also oversaw some of the reconstruction, said it welcomed the discussion.

“Since the beginning of our engagement in Afghanistan, we have taken measures to protect U.S. government funds from misuse and waste. At the same time, we have encouraged the Afghan government to address corruption and used our assistance to advance anti-corruption efforts,” a department official said. “We have consistently sought to improve those protective measures and programs over time as we better understood the challenge.”

The official said Afghanistan in 2001 wasn’t capable of addressing the problem, but the situation has improved with a new government demonstrating the political will and growing ability to fight corruption.

“We are beginning to see real and tangible progress in rooting out corruption. The government is committed to pre-empting corruption and to holding corrupt officials accountable,” the official said.

Mr. Sopko acknowledged in his report that Afghan officials were starting from a rough spot after 2001, when a U.S.-led coalition ousted the Taliban in response to that government’s protection of Osama bin Laden, and the al Qaeda network that perpetrated the Sept. 11, 2001, terrorist attacks.

But Mr. Sopko said the U.S. made things worse by pouring money into the country without paying enough attention to who was receiving it.

In 2012, the Defense Department paid some $19 billion to contractors for transportation, construction, security and support services in Afghanistan — only slightly less than the country’s $20.5 billion gross domestic product that year.

Foreign aid also flowed, leaving the country awash in cash but without the capacity to handle it.

By the time the U.S. began to pay more attention to corruption in 2009 and 2010, the problems ran all the way to the top of the Afghan government.

One of the biggest impediments was former President Hamid Karzai, whom the U.S. backed to become Afghanistan’s leader after ousting the Taliban. Mr. Karzai at one point destroyed a massive corruption investigation into a man believed to have smuggled out of the country as much as $2.78 billion in money for Afghan officials, drug traffickers and insurgents from 2007 to 2010.

After the U.S. prepared a case and had Afghan authorities arrest the man, Mohammad Zia Salehi, Mr. Karzai, just hours later, ordered him released.

“The Afghan government was so deeply enmeshed in corrupt and criminal networks that dismantling them would mean dismantling major pillars of support for the government itself,” the inspector general said in his report.

Mr. Sopko said the government of President Ashraf Ghani is more promising. He has invited Mr. Sopko’s team to be part of procurement meetings and has made fighting corruption a major part of his administration.

As for the U.S., he said anti-corruption efforts must be a higher priority as the U.S. finds itself propping up governments and making those responsible for doling out U.S. aid aware that they will be judged by more than the dollars spend or the number of projects they build.

“It is vital to know whom we are doing business with,” Mr. Sopko said.