The report from Stuart Bowen Jr., the Bush administration's special inspector general for Iraq reconstruction, said the $147 million project to create an Iraqi Oil Protection Force of 14,400 troops and an Iraqi Electric Power Security Service of 6,000 guards was ineffective, The Washington Times reported.
It said the electric security service no longer exists and the oil force has shown only sporadic success.
There was some good news, however. The report said electricity generation is improving and has exceeded pre-war levels in areas outside Baghdad.
Bowen also confirmed U.S. military claims that the 250,000-strong Iraqi security force has greatly improved.
"Large-scale counterinsurgency initiatives this quarter demonstrated the growing capacity of the Iraqi forces to operate successfully in the field," the report said.