The officials said they believed much of the American money was not making its way to frontline Pakistani units but being diverted to help finance weapons systems designed to counter India.
The military had also inflated claims for fuel, ammunition and other costs to the tune of tens of millions of dollars, officials said.
"I personally believe there is exaggeration and inflation," said a senior American military official who reviewed the programme.
"Then, I point back to the United States and say we didn't have to give them money this way."
A European diplomat in Islamabad told the Times that the US should have been more cautious with its aid, saying: "I wonder if the Americans have not been taken for a ride."
Pakistan rejects claim
Pakistani officials denied the accusation, expressing anger at American "ingratitude" for Pakistani counterterrorism efforts that have cost the lives of 1,000 of its soldiers and police officers.
They also said the US had refused to sell Pakistan advanced helicopters, reconnaissance aircraft, radios and night-vision equipment.
"There have been many aspects of equipment that we've been keen on getting," said Major-General Waheed Arshad, the Pakistani military's chief spokesman.
|Officials said there were no |
guidelines or benchmarks
"There have been many delays which have hampered this war against extremists."
Talat Masood, a retired Pakistan general, told Al Jazeera the accusations were unfair.
Most military equipment, he said, could be used for counter-terrorism as well as against India. But Pakistan was enjoying good relations with India and there was no priority to dedicate weapons to counter its neighbour, he said.
Pakistan's military relies on Washington for roughly a quarter of its entire $4bn budget, the Times said.
The $5bn was provided through a programme known as Coalition Support Funds after the September 11, 2001 attacks against the US, reimbursing Pakistan for conducting military operations to fight "terrorism".
American and Pakistani officials, the Times said, acknowledged that there were few goals, benchmarks or guidelines for how the money should be spent or accounted for.
The Pentagon completed a review only last week - more than six years after the money first started pouring in - to come up with a plan to help the Pakistani military's counterinsurgency force.
The plan seeks to focus American military aid towards specific equipment and training for Pakistani forces operating in the Federally Administered Tribal Areas where al-Qaeda and local fighters hold sway, the Times said.
But American officials estimate it will take at least three to five years to train and equip large numbers of army and Frontier Corps units, a paramilitary force now battling fighters, the paper said.
"I don't forecast any noticeable impact," a US defence department official said. "It's pretty bleak."