WASHINGTON, July 30 (Reuters) - Iraq's government failed to take responsibility for reconstruction projects and is struggling to administer its budget for oil, public works and education, a U.S. special inspector general said on Monday.

Looking at how $44 billion in U.S. funds has been spent in Iraq for relief and reconstruction since 2003, the inspector general found "troubling concerns" in the last quarter about the process meant to transfer control of projects to the Iraqi government.

"My auditors found that the asset-transfer process is broken: since June 2006, the GOI (government of Iraq) has not formally accepted a single IRRF (Iraq Relief and Reconstruction Fund) project," Stuart Bowen, the inspector general, said in a message released with the report.

Congress created the post of special inspector general for Iraq reconstruction to oversee how U.S. funds were being spent.

The U.S. government is unilaterally transferring many projects to Iraq without the Iraqi government's consent, the report said.

"The failure of the asset-transfer program raises concerns about the continuing operation and maintenance of U.S.-constructed projects," the report said. "In some cases, the United States has continued to pay for maintaining complete projects that have not been accepted" by Iraq.

The U.S. funds for Iraq reconstruction have been largely expended, which means the Iraqi government now has the responsibility for managing the financing of the country's recovery, according to the report.

Iraq failed to manage effectively its capital budget in 2006, spending only 22 percent of it, the report said. The numbers for 2007 are an improvement and could reach 50 percent this year if current trends continue.

The Oil Ministry leads all others in total spending this year, executing $538 million or 23 percent of its capital budget, followed by public works, $174 million or 52 percent, and education, $87 million or 30 percent, the report said.

The inspector general looked specifically at the largest reconstruction contract in Iraq last quarter, $1.33 billion for various projects to Bechtel National Inc. issued by the U.S. Agency for International Development.

"The problems addressed in the Bechtel audit include reduction in scope, cancellations, costs that outstripped planned budgets and significant delays in the completion of projects," the report said.

Auditors also found a contractual provision requiring all Bechtel invoices be paid within 10 days of receipt, which was "troubling" because only two officials were assigned to review invoices, raising concerns "about the reliability of receipt review process."

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