Despite increased counterterrorism efforts by Damascus, as much as 90 percent of the foreign fighters in Iraq cross the border from Syria, according to a Pentagon report that says Iran's support for Shiite militants also is hurting efforts to improve Iraq security.

As those external pressures dog coalition and Iraqi forces, the government of Iraq is also hamstrung by internal corruption and persistent problems getting basic services to the people, the report said.

The Defense Department's quarterly report on progress in Iraq, released Tuesday, said that militants continue to find safe havens and logistical support in Syria.

"It is not clear that Syria has made a strategic decision to deal with foreign terrorists using Syria as a transit point into Iraq," said the report, which covers events from December through February.

In late January, Iraqi officials suggested that about 150 foreign and Iraqi fighters slipped into the country from Syria a few months earlier and were responsible for a devastating explosion in northern Iraq that killed at least 38 people and wounded more than 200.

On the other border, meanwhile, Tehran's support for Shiite militant groups remains a sizable threat to stability in Iraq. The report asserts that the Quds Force, an elite unit of Iran's Revolutionary Guards, still provides much of the explosives for the militants.

Several military commanders in recent weeks have said that despite recent promises by Tehran to help promote stability in Iraq, there is continued evidence that Iran is training and funding Shiite extremists.

During a recent visit to Iraq, Iranian President Mahmoud Ahmadinejad dismissed the allegations and said instead that the U.S. presence there was the problem.

The Pentagon report reflects the ongoing decline in violence in Iraq, bolstered by last year's increase in U.S. forces and the continuing growth of the Iraqi troops.

But while it specifically points to improved security conditions in Anbar Province, Baghdad and some surrounding areas, it also said al-Qaida remains strong in parts of the Tigris River Valley and in Ninewa Province.

Al-Qaida members, it said, have been targeting key figures in the groups of Sunni tribesman that have joined to fight the terrorists. The U.S.-funded groups are called the Sons of Iraq, and the report said they numbered about 91,000, with more than 71,000 being Sunni and the remainder Shiite.

Overcoming corruption in the government, the judiciary and prison systems continue to be key challenges. And the Iraqi government is still struggling to provide basic services to its citizens. Electricity demands have grown and — as of the report date — outpaced supplies by 57 percent.

While electricity generation hit a record high in December, it then dropped sharply in January due to maintenance and fuel distribution problems.

In related testimony on Capitol Hill on Tuesday, auditors told Congress that Iraq isn't spending much of its own money, despite soaring oil revenues that are pushing the country toward a massive budget surplus.

The expected surplus comes as the U.S. continues to invest billions of dollars in rebuilding Iraq and faces a financial squeeze domestically because of record oil prices.

"The Iraqis have a budget surplus," said U.S. Comptroller General David Walker. "We have a huge budget deficit. ... One of the questions is who should be paying."

Walker and the other auditors did not give a figure as to the likely surplus. U.S. officials contend that Iraq's lack of spending is due primarily to Baghdad's inability to determine where its money is needed most and how to allocate it efficiently. Two senators have called for an investigation into the matter.

Democrats say the assessment is proof that the Iraq war as a waste of time and money. The U.S. has spent more than $45 billion on rebuilding Iraq. And while officials in Iraq contend that much progress is being made, many projects remain unfinished and U.S. troops are still needed to provide security.

"They ought to be able to use some of their oil to pay for their own costs and not keep sending the bill to the United States," said Sen. Patrick Leahy, D-Vt.