The US government spent just 2% of the $18.4bn (£10bn) it had obtained from Congress for the urgent reconstruction of Iraq before formally ending its occupation last week.
The White House budget office report, the first detailed audit of the reconstruction, showed that the US occupation authorities had spent nothing on healthcare or water and sanitation, two of the most urgent needs for Iraqis. In contrast, a total of $9m was spent on administrative expenses.
By June 22 America's reconstruction campaign had spent $366m of the sum allotted to the Iraq Relief and Reconstruction Fund.
The White House blames the spending paralysis on the wave of ambushes, kidnapping and sabotage gripping Iraq that has forced many projects to be postponed or cancelled.
"These challenges continue to impede the actual work from being executed and completed on schedule," the report said.
The violence continued yesterday when guerrillas attacked a trunk pipeline linking northern and southern oil fields, posing a further threat to exports that have helped fund reconstruction.
With the US reluctant to disburse cash, reconstruction money has largely been drawn from Iraq's oil receipts, with some $19bn of a $20bn fund spent during the Coalition Provisional Authority's tenure in Iraq.
According to yesterday's Washington Post more than $6bn of the oil fund has been spent in the past two months alone.
The American funding was intended to be used to help train Iraq's police force and to rebuild the country's national infrastructure, including its electricity grid bombed during the war, sewage treatment plants, schools, hospitals, telecom facilities and roads neglected since the 1991 Gulf war.
An additional $1.1bn came from grant and loan pledges from other countries.
In its accounting of the funds, the White House budget office said the largest disbursement so far was for rebuilding Iraq's police and military, with $194m spent.
But that figure was less than the planned spending of $3.2bn to provide security.
Despite the complaints from Iraqis about blackouts and an erratic power supply, just $109m was spent on repairing Iraq's electricity grid, compared with the $5.4bn allocated in the reconstruction fund.
Other urgent needs were also unmet. Although Iraq has an unemployment rate of 30%, the fund created only 15,000 jobs, compared with the 250,000 that had been mandated.
A spokesman for the budget office said the figures were misleading and projects costing $5.3bn were in the pipeline.
"The reconstruction effort is moving forward," the report said.
"The coalition has helped Iraqis rebuild schools and refurbish hospitals and health clinics, repair bridges, upgrade the electrical grid and ports and modernize the communications system."
As evidence of progress, the report said 1.2m telephones had been connected as of June 18 and 2,500 schools had been repaired.
But even by the standards of the budget office, those achievements lagged far behind earlier projections.
In a report published as recently as last spring, the administration said it expected to spend more than $10bn on reconstruction projects by June 30.
The reality, which was made apparent in the report released on Friday in advance of the July 4 holiday weekend, is bound to raise questions from Iraq's new rulers - and during the US election campaign - about the use of the $87bn package approved by Congress in November.
The Bush administration had said that the funds were needed urgently to stabilize Iraq, and enhance the security of US forces.
There was confusion last night over the fate of a Lebanese-American marine corporal who was kidnapped last month after apparently deserting from his base in Iraq, writes Rory McCarthy in Baghdad
On Saturday a group calling itself Ansar al-Sunna (Companions of the traditions of the prophet), which has been fighting the US military in Iraq, apparently said it had beheaded Wassef Ali Hassoun, 24, who was serving the marines as a translator.
But last night Ansar al-Sunna issued another statement insisting that it had not killed him.
The US military and Lebanese foreign ministry said there was no evidence that he was dead.
Last week US military officials told the Guardian that Corporal Hassoun was last seen on June 19, was reported missing on June 20 and appeared to have gone absent without leave.
Last week video footage was released showing him kneeling before gunmen, who demanded the US military leave Iraq.
Jean Obeid, Lebanon's foreign minister, said that a Lebanese diplomat in Baghdad had been in indirect contact with his kidnappers.
© Guardian Newspapers Limited 2004