The report by the department Inspector General's office said the command in charge, known as the Multi-National Security Transition Command-Iraq, was unable to provide "reasonable assurance" that the money was used to achieve the intended results or that it was protected from waste.

The inspector general recommended that the commander involved, Lt. Gen. James Dubik, improve internal controls for keeping track of the money and maintaining adequate records of its use. The report said the commander reported that he already has acted to implement recommended changes.

The report, based on an auditors' visit to Iraq from March to May 2007, said the command's ability to oversee management of the fund is hurt by high levels of violence. It also noted that the command has fewer onsite comptrollers and other oversight resources than large commands in the United States.

Some examples of the auditors' findings:

-The inspector general audited equipment purchases valued at nearly $1.1 billion (euro760 million), for armored vehicles, weapons, ammunition and other items, from two sets of supply sources. Of $643.1 million (euro441.9 million) from one set of suppliers, the inspector general was able to follow a paper trail for 12.9 percent of it, or $82.9 million (euro57 million). Of $438.2 million (euro301 million) from the second set, an audit trail was available for only 1 percent.

-The command could not account for 18 of 31 heavy tracked recovery vehicles valued at $10.2 million (euro7 million). Also, the command could not prove that Iraqi Security Forces received 2,126 of 2,943 generators valued at $7 million (euro4.8 million). It also could not account for six of 18 garbage trucks valued at $700,000 (euro480,970).

-On a brighter note, an examination of service purchases - for food preparation, maintenance, sanitation, freight, lodging and security - valued at $1.2 billion (euro820 million) showed the command had sufficient documentation for 95.5 percent of it.