BAGHDAD – A U.S.-funded water-treatment system for the city of Fallujah will be completed at least three years late, cost more than three times as much as originally planned and serve only a fraction of the city, according to a report by the official monitoring Iraq’s reconstruction.

The $32.5 million project was launched in July 2004 – when insurgents largely controlled the city – and U.S. officials expected it would be completed in January 2006, according to a report set for release today. Now, the main contractor assigned to the project has been let go, costs have ballooned to $98 million and the system, which is expected to be operational in April, will serve 38 percent of the city’s 400,000 residents, inspector general Stuart Bowen concluded.

The Fallujah water-treatment system is the only U.S.-funded project of its kind. American officials made it a priority because they wanted to show their commitment to rebuilding a predominantly Sunni city that was nearly obliterated in 2004 during fierce combat.

The inspector general’s office launched a probe this summer after U.S. Ambassador Ryan Crocker expressed concern over the delays and cost overruns.

The multibillion-dollar U.S. effort to rebuild Iraq’s ailing infrastructure has been stymied by violence, bureaucratic infighting, poor performance by contractors and disagreements between American and Iraqi officials.