BAQOUBA, Iraq - Outside the crumbling elementary school, goats feed on trash strewn across the front yard. Inside, the ceiling is rotting, toilets don't work and students scrunch hip-to-hip behind narrow desks.

Millions of dollars in international aid to build and repair Iraq's dilapidated schools have for years gone unspent. Now, Iraq's government risks losing the funding as the World Bank weighs whether some of it would be better used elsewhere.

The dilemma is one that echoes across the international aid community - whether to continue financing a government with vast oil resources and a $100 billion annual budget or divert the assistance to needier nations. It also reflects growing frustration over the bureaucratic hurdles and contracting problems that have kept the money from being used.

The spending delays have left buildings like the scruffy al-Min elementary school in the former insurgent stronghold of Baqouba, 35 miles northeast of Baghdad, in limbo. It's one of thousands of schools across Iraq that desperately need money for repair.

"The building looks like a prison, not a school," said headmaster Abdul-Karim Mohammed Sabti. "This is not an appropriate atmosphere for learning."

The education aid is a slice of $1.3 billion in grants and loans the World Bank and its donor nations have given Iraq since 2004 to fund efforts ranging from labor and welfare programs to providing emergency health services and protecting the environment. Initially, the money was intended to help rebuild the country after the 2003 U.S.-led invasion that ousted Saddam Hussein. But the bank maintained the assistance as it became clear the country desperately needed help as it faced years of violence.

More than one-third of the overall assistance - about $469 million - has yet to be spent and the World Bank must decide soon whether to extend a deadline for several of the programs to close by the end of June, or face losing grants to rebuild schools.

"When we talk with the government, when we talk to the primary stakeholders in the country, we try to explain to them that it is a pity that this money is just sitting where it is and it is not being utilized," said Marie-Helene Bricknell, the World Bank's special representative for Iraq.

Some of the money may have to be given back and distributed to the world's poorest counties if Iraq continues to sit on it, she said.

"It may difficult for us to argue (to keep) it if Africa needs the money, or if there is another food crisis in the world," Bricknell said. "Given the austerity around the world, it may be very difficult."

But World Bank officials in Baghdad also acknowledged the Iraqi government faced tremendous hurdles in trying to carry out the projects. There was no parliament when the first tranche of funding was provided, and the government was barely functional in the years the nation teetered on the brink in civil war.

The projects have picked up since Iraq's new government was seated in late 2010, but bureaucracy and contracting problems have stunted progress.

The World Bank is the latest foreign donor to be frustrated by Iraq's lax use of reconstruction aid. Billions of U.S. taxpayer funds have been wasted on projects to rebuild Iraq since the 2003 invasion. Auditors and prosecutors say much of the money has been siphoned away in corrupt contracts.

U.S. funding for Iraq is also dropping dramatically following the departure of American troops in December. Congress is considering cutting aid to Iraq by 77 percent and slashing what was initially touted as a $1 billion program for Iraqi police that was to be the centerpiece if the U.S. Embassy in Baghdad's efforts to continue training security forces.

In 2005, the World Bank began giving Iraq an additional $508 million in special loans that have little to no interest to try to speed up the development projects. The loans are normally given to the world's poorest countries, nearly half of which are in Africa.

Iraq is not considered a low-income country by the World Bank and normally would not be eligible for the funds. But an exception was made as Iraq struggled to recover from upheaval. A quarter of Iraq's population of 31 million lives in poverty, and 15 percent are unemployed, according to U.S. data compiled by the Central Intelligence Agency between 2008 and 2010.

Iraqi schools provide a stark example of the problem. Less than half of the $204 million earmarked for education programs has been spent.

Baghdad has asked for more time to spend about $16 million that's left from grants issued in October 2004 to rebuild schools. The Bank has signaled it may extend the June 30 deadline for the grant by another year.

With the roughly $44 million that's been spent so far, Iraq's education ministry has built 37 new schools nationwide and upgraded 133 old ones. Thirteen more schools are under construction and are expected to be completed by June 2013. Another 30 schools were built in Iraq's southern marshlands between 2006 and 2009 under a different World Bank program that cost $5.2 million.

All the 37 new schools were finished over the last 18 months, said senior Education Ministry official Saad Ibrahim Abdul Rahim, who is the agency's head liaison to the World Bank. He blamed the yearslong delay on bureaucratic snarls, a slow cash-flow to contractors and a lack of available land in populated areas upon which to build.

But last year, the ministry won approval from the prime minister's cabinet to build schools on land that belonged to other government agencies, and progress was made.

More than 6 million students attend Iraq's 15,000 public schools. Rahim said at least 5,000 more schools are needed to ease severe overcrowding.

Another $100 million was given to Iraq as an emergency education loan to ease crowding and update the curriculum in Iraq's schools. The project began in November 2005. Since then, the government has spent only $11 million and has three times asked for the loan to be extended in order to keep the money. It currently expires in June 2013.

There was initial optimism when the World Bank reconstruction program in Iraq began in 2004, but that vanished as the country spiraled into a cycle of violence with sectarian fighting and an insurgency that killed tens of thousands of people.

"After the collapse of the Saddam regime, there was a strong feeling that Iraq was going to grow and build a lot of projects," Rahim said. "But a year later there was a lot of sectarian conflict, and a lot of problems that caused a huge delay to all of the projects, in all of the ministries, for the reconstruction of Iraq."

Rahim was confident the deadlines would be met as violence ebbs and Iraq edges toward stability.

The Education Ministry spent $6.9 million of the loan funding last year - more than six times of what it spent in 2010. By comparison, the ministry spent $19,800 from the loan fund in 2008.

"We are on track now and the project is going ahead, and there are no huge challenges or any big obstacles to slow or detail it," Rahim said.

Overall, Iraq had spent nearly $839 million of the $1.3 billion in World Bank grants and loans as of March 31, the latest data available. That money has helped create cell phone networks, improve drinking water for 600,000 people, rebuild and restock hospital emergency rooms, and train dozens of doctors and nurses across Iraq, according to the World Bank.

It has also paid for several studies to strengthen Iraq's government, reduce poverty and provide forecasts for the oil and gas industry through 2030 - and any spinoff businesses that can create jobs and generate money.

And it has put 80 million textbooks in the hands of students whose numbers are growing every day. Half of Iraq's population is under 18, according to the United Nations, forcing schools to teach classes in morning and afternoon shifts to accommodate all the students.

In Iraq's northeast Diyala province alone, 381,000 students are enrolled in schools, said local education director Jaafar Moween al-Zarkushy.

Of 870 schools in Diyala, 65 were destroyed in sectarian fighting since 2003, al-Zarkushy said. Another 110 schools are about to collapse, and 17 more have been deemed inadequate because they are made out of mud.

"All students need a place to go to be taught," al-Zarkushy said forlornly. "The signs are not encouraging."