The Defense Department failed to properly account for almost $9 billion of Iraq reconstruction funds, which is 96 percent of the money it received from 2004 to 2007, according to a report released Tuesday by the U.S. Special Inspector General for Iraq Reconstruction.

Eight organizations in the department were authorized to spend $9.1 billion from the Development Fund for Iraq, which is made up of funds from Iraq's oil and gas exports, surplus money from the United Nations Oil-for-Food Program and frozen Iraqi assets. The Defense organizations were supposed to set up accounts at the Treasury Department to manage the money, but only the Army Central Command did so for the roughly $400 million it received.

As a result, the SIGIR report found, the remaining $8.7 billion was "vulnerable to inappropriate uses and undetected loss."

The report faults the Pentagon for not issuing guidance on establishing the accounts at Treasury until December 2004, about six months after Defense organizations had received most of the money from the Development Fund for Iraq. The department also didn't name an official to make policy on or oversee the use of that money, the report says.

The Treasury accounts are intended to ensure accountability for non-U.S. government funds. Because Army Central Command established an account, it was able to give SIGIR a full rundown of its DFI obligations, expenditures and remaining balances. The other organizations could not.

Much of the $9.1 billion was controlled by the Joint Area Support Group-Central and the Army Corps of Engineers. Also holding funds were the Army's Project and Contracting Office for Iraq, the Multi-National Corps-Iraq, the Joint Contracting Command Iraq/Afghanistan, the Air Force Center for Engineering and the Environment, and the Navy.

The Iraqi government withdrew U.S. authority to administer the DFI funds at the end of 2007, but the SIGIR report found that the Pentagon is still holding on to millions of dollars because of its poor financial management.