United were humiliated at Brentford on Saturday where a 4-0 defeat for Erik Ten Hag's side saw them fall to the bottom of the Premier League, having already lost 2-1 to Brighton on the opening weekend.
"It has been one of the problems United have had for 10 years, they have flip flopped between different managers and different strategies and allowed managers to influence the actual overall recruitment," said Neville on Sky Sports.
"That has been a massive issue, we looked at the last 10 years of major signings at the club, we removed third goalkeepers and some of the younger players.
"But £1.25billion has been spent and we categorised them - we did it together, some do not agree.
"We think there are only two signings at this moment in time that you could say have been good value and performed at a level and, to be fair, Fernandes has gone off the boil a little bit, but because of the numbers he hit in the last couple of seasons you would have to say that worked, and Ibrahimovic - obviously that worked.
"Cristiano Ronaldo would have been a green (success) but what has happened in the last month, he wants to leave, the confusion over him - it is a nightmare scenario and it is not working."
Neville, who commentated on the defeat at Brentford, continued his analysis, labelling Old Trafford a "graveyard" for players.
"It is a horror story from a recruitment point of view," he added.
"I know there is a big call for blaming the players and we have blamed the players a lot over the last 10 years, I was excited about those players coming to the club as many people were.
"Even last year with Jadon Sancho, Rafael Varane, Ronaldo - great signings. When (Angel) Di Maria came, we said it would be a great signing.
"But it has become a graveyard for football players this football club, where players are considering whether to even come to the club, they can't get players in."
Despite criticising the players, Neville once again hinted at the ownership of the club causing the main issues.
"When a school is underperforming and getting poor results regularly over a period of time they get put in special measures by government and the kids don't get blamed," he said.
"That is where Manchester United are, it is special measures and you can't blame the kids any more."