Hundreds of thousands of dollars has been invested in redundant lighting systems and unnecessary technical equipment, the audit found, but "the program has not yet achieved its intended results in the form of actual improvement in port security."

In addition, less than a quarter of the $517 million that the department distributed in grants between June 2002 and December 2003 had been spent as of September 2004, the inspector general found. The report also questioned whether grants allocated for small projects in resort areas and some remote locations should have been considered as critical to national security needs as larger projects at ports that are more vital to the national economy.

The findings, released earlier this week, were the latest to criticize the Homeland Security Department's antiterrorism grant program, which has come under attack by people who say it has set poor priorities. For example, Wyoming received four times as much antiterrorism money per capita as New York did last year, according to a Congressional report.

A Department of Homeland Security spokesman, citing the department's defense of the port grants that was included in the audit, declined requests for further comment. In remarks included in the audit, a Homeland Security official said the department had taken the higher risk factor of larger ports into account.

Ninety-five percent of all international commerce enters the United States through its roughly 360 public and private ports. But nearly 80 percent of that trade moves through only 10 ports, with the biggest loads passing through Los Angeles, Long Beach and Oakland in California and New York. That is why the nation's biggest ports are seen as particularly attractive as terrorist targets. Severely damaging one would not only cause deaths, injuries and property damage, but could also disrupt the flow of many basic goods into and out of the country, port officials say.

Part of the problem, the audit found, is that the annual grants were given out based on applications submitted by individual ports and then awarded even when department staff members found that many of the submissions lacked merit. Instead of withholding money because of a shortage of viable projects, the department disbursed the money to finance dubious security initiatives, many of which are detailed in the 70-page report. The grants are described in some detail, but the names of the winners and losers are not disclosed.

The grant program was intended to limit awards to what were considered strategic ports, meaning terminals that handle a large volume of cargo or a high number of passengers, are next to military facilities, or handle hazardous cargo.

After examining four separate rounds of port grants, the inspector general found that the department appeared to be intentionally distributing the money as widely as possible across the country, instead of focusing it on the biggest ports or on other locations that intelligence reports suggested were most likely to be future targets.

Major ports like New York, Los Angeles, Long Beach and Oakland received large allocations. But smaller grants went to ports in places like St. Croix in the Virgin Islands, Martha's Vineyard, Mass., Ludington, Mich., and six locations in Arkansas, none of which appeared to meet the grant eligibility requirements, the audit said. The department, as a result, "had no assurance that the program is protecting the nation's most critical and vulnerable port infrastructure and assets," the audit said.

Grants to ports were just a small piece in the more than $2.5 billion given out last year by Homeland Security to local and state governments, as well as to private enterprises. The money is to be used to help prevent attacks and to help equip rescue personnel and other public safety crews in case they need to respond to an attack.

The audit results appear to support criticism voiced last September by Senator Frank R. Lautenberg, Democrat of New Jersey, who complained in a letter to President Bush that the methods used to grant the awards did not make sense.

"Your administration awarded port security grants in the states of Oklahoma, Kentucky, New Hampshire and Tennessee," Mr. Lautenberg wrote. "While there may be some form of maritime facilities in these locations, I question whether, of the nation's 361 maritime ports, these locations are truly the front lines on the war on terror."

In California and New York, officials have repeatedly expressed frustration at what they say is insufficient federal financing for their port security projects. Senator Dianne Feinstein, Democrat of California, predicted in 2003 that with nearly half of all port trade going through her state, "there is an almost a one-in-two chance" that any radiological explosive device, known as a "dirty bomb," sent to the United States in a ship container would pass through California.

"Clearly, we need to allocate a considerable portions of seaport security resources to California ports to prevent or respond to such an attack," Ms. Feinstein wrote to the Department of Homeland Security.

In objecting to the findings, an administrator at Homeland Security, Anna F. Dixon, wrote that the grant program "continues to enhance security and address real or potential vulnerabilities in our nation's ports and waterways." Ms. Dixon said the grants were given "where they are needed most to improve security in U.S. ports."

But Ms. Dixon, who works for the department's chief financial officer, also said that Homeland Security intended to adopt several of the auditor's recommendations in order to allocate the money in the future to the highest-risk ports.

The Port Authority of New York and New Jersey, in four rounds of port security grants, received $6.2 million, or 1 percent of the total grants given out through the primary port security financing source, according to federal documents.

When other New York-based government agencies and private corporations are added in, the grants to the New York City area rise to about $35 million, about 7 percent of the total. The port handles 12 percent of the nation's cargo traffic. Much of the grant money directed to New York went to profit-making oil terminal companies, like Sunoco Logistics Partners, to help them pay for security enhancements.

Anthony R. Coscia, chairman of the port authority board, said it had long been obvious to him that the grant-making criteria needed to be changed.

"We have only gotten a fraction of the money we have requested," Mr. Coscia said. "We have to start dealing with security based on what intelligence analysis leads us to conclude are greatest areas of vulnerabilities, and not on geographic distribution or political considerations."

According to the audit, the questionable projects that were financed include:

¶$130,000 for a closed-circuit television system at one port, awarded even after the department ranked the project 27th of 29 applications and stated in its internal review documents that "these initiatives would be redundant to what the port authority has in place."

¶$180,000 to install security lights at a port that the department noted is a "small, remote facility that receives less than 20 ships per year."

¶$10,000 to one port for encrypted radios that the field staff concluded were not needed and perhaps not compatible with federal and state radios.

Grants were also given to private-sector projects that "appeared to be for a purpose other than security against an act of terrorism," the audit said, or simply to replace existing security.

At one port - next to which stood a luxury entertainment pavilion that included restaurants, a hotel and spa - a $25,000 grant was given to install video surveillance equipment and alarms, a project that department staff members had ranked last among the applications. The auditors concluded that it "appears to support the normal course of business" and was unrelated to any potential terrorist threat.

In another case, a $935,000 grant was awarded for general security improvements to a port where an industrial park was being built, leading department staff members to question if the money was in fact an economic development grant, instead of antiterrorism financing.

The Department of Homeland Security requires that the grant money be spent within a year of the award, but few of the recipients met this provision, the report says. The auditors found that few of the projects were ready to start construction at the time of the award, despite the one-year requirement.