War-torn Somalia's government remains riddled with corruption while Shebab Islamists are as deadly as ever, UN investigators warned in a damming report seen by AFP Monday.
The report also says that weapons sent to the national army and supposed to be used to defend the internationally-backed government have been seen on open sale in at least one market where Shebab agents bought arms.
"Underlying corruption as a system of governance has not yet fundamentally changed and, in some cases, arguably has worsened," the new report by the UN Monitoring Group on Somalia and Eritrea said.
The UN Security Council last year allowed a partial lifting of an arms embargo on Somalia to allow the national army to rearm, but "some of the weapons and ammunition have been diverted to arms markets in Mogadishu", the report said.
Financially, the UN experts said they had "consistently found patterns of misappropriation with diversion rates of between 70 and 80 percent".
"The indications are that diverted funds are used for partisan agendas that constitute threats to peace and security," said the 482-page confidential report, which was provided by a UN source.
Around a third of revenues from the capital Mogadishu's busy seaport, a key source of income totalling millions of dollars for the internationally funded government, cannot be accounted for.
Meanwhile the Al-Qaeda-affiliated Shebab have shifted tactics in the face of sustained military assaults by the 22,000-strong African Union force and repeated air strikes, including last month's assassination of insurgent commander Ahmed Abdi Godane.
But air and drone strikes are doing little to damage the militia in the long term.
"Strategic strikes have in general resulted in short term gains but significantly failed to diminish Al-Shebab's operation capacity," the report read.
"There is no current evidence that they have the potential to 'degrade and destroy' Al-Shebab."
At home, the Shebab have increased their use of bombs including the "noticeable" introduction of magnetic vehicle bombs, a tactic previously more commonly used in Afghanistan and Iraq, and which "may represent a transfer of battlefield knowledge to Somalia," it added.
The report also says the Shebab, who carried out the September 2013 massacre in the Kenyan capital Nairobi's Westgate mall, continue to pose a regional threat.
Indeed, pressure on the fighters has forced them to "become more operationally audacious by placing greater emphasis on exporting its violence beyond the borders of Somalia" and across the Horn of Africa.
"The Al-Shebab core can coordinate and conduct successful attacks throughout the Horn, in addition to retaining the operational capability to specifically target Westerners in Djibouti and Kenya, among other countries."
The Shebab have lost a series of key towns and ports to the AU force and government army, heralded as advances that will stem the militants' multi-million dollar trade of charcoal to Gulf countries.
Total charcoal exports in 2013-14 topped $250 million despite a UN Security Council embargo on the trade.
But UN experts cautioned that while key ports were in control of AU and government troops, the trade continues unabated and the Islamists continue to profit, including through their control of production sites and truck checkpoints, as well as extortion of businessmen.