In the news: Special Inspector General for Iraq Reconstruction says that 96% of the money from the Development Fund for Iraq cannot be accounted for. This is very different, and probably worse, than saying those funds were ineffective. Based on press releases, the Department of Defense just hasn't a clue where the money went. To further illustrate the situation, see the attached pie chart.
No one has ever accused the military of being efficient, but even with the infamous $640 toilet seat we at least knew where the money went. If there's one thing a giant bureaucracy like the D.O.D. should be good at, it's keeping paperwork. Those times seem to have changed since the Bush presidency and Iraq invasion.
So where did those 8.7 billion dollars go? As a personal guess, we'll probably find Jimmy Hoffa before those funds are fully accounted for. However, based on the record so far, it's likely that money was eaten up by the fraud, bribery and theft which has plagued reconstruction efforts from the start. How did this problem begin?