Inspector General Barry L. Kluger says problems with awarding contracts have caused further delays and added another $120 million to the tab.
The Metropolitan Transportation Authority says it has adopted cost-saving measures.
The New York Times obtained Kluger's response to Manhattan Borough President Scott Stringer, who had sought explanations.
Federal officials now estimate the first phase of work will be completed in February 2018. The MTA's estimate is July 2017.
It's being built to reduce crowding on the Lexington Avenue line. The neighborhood lost its Second Avenue Elevated in 1940.