Pentagon officials are downplaying declarations by Iran that it is spending some $1.7 billion provided by the United States on new advanced weapons systems, while also acknowledging that the Islamic Republic continues to build its military arsenal at an increasing rate, according to a Defense Department assessment obtained by the Washington Free Beacon.

Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, informed Congress in an unclassified communication last week that the Pentagon does not believe Iran has spent some $1.7 billion awarded by the United States as part of what many described as a "ransom" payment to purchase new military equipment.

However, Dunford said that Iran is boosting its war machine, causing "great concern" among regional allies and other groups, according to information provided to Congress that downplayed the impact of the $1.7 billion payment to Tehran.

The assessment has been met with skepticism by congressional sources and foreign policy insiders who pointed to recent statements by Iranian officials who said that U.S. funds have been allocated to military sources.

"Intelligence assesses that the $1.7 billion transferred to Iran probably was allocated predominately to Iran's economic sector, in accordance with Tehran's stated emphasis on economic expansion, modernization, and diversification," Dunford said in response to multiple questions from lawmakers, including Sen. Ted Cruz (R., Texas) and 17 other senators.

Lawmakers suspect that Iran has used this cash infusion to boost its military operations in the region, including in Syria, Yemen, and Iraq.

However, Dunford maintained this is not the case.

"Iran continues to seek improved missile systems and the replacement of aging military equipment, particularly aircraft and naval vessels," he wrote. "However, there is a lack of information to suggest Iran is attempting to use the $1.7 billion towards these interests."

One veteran foreign policy insider who liaises with Congress on the issue told the Free Beacon that the Pentagon is working off of politicized intelligence that aims to downplay Tehran's military aspirations.

"Literally no one on the Hill takes the Obama administration seriously when they talk about the Iran ransom," the source said. "Everyone knows the intelligence is politicized to hide the damage done by the president's diplomacy. There's a reason every Democrat in Congress voted for locking in Iran sanctions in the Iran Sanctions Act a few weeks ago. American lawmakers have had enough."

Iranian leaders claimed earlier this year that Iran had ordered the $1.7 billion be invested in the country's military budget.

When asked about these reports at the time, the State Department declined comment, telling the Free Beacon: "We would refer you to the Iranian government to address questions about its budget."

The nearly $2 billion, which was delivered to Iran in cash, is a substantial cash infusion to the country's coffers and was viewed by lawmakers as a primary means for Iran to invest in advanced military technology.

Since the payment was made, Iran has pursued multiple arms deals with Russia and sought to purchase a slew of new commercial jetliners, which the country has historically integrated into its air force.

Dunford admitted in his correspondence to Congress that Iran's actions—including the buildup of ballistic missiles and other advanced weaponry—continue to cause worry in the Middle East.

"Regional actors have expressed great concern about Iran's activities and intent, but I have not received new, specific concerns regarding an increasing belligerence or growing military investment on the part of Iran," Dunford wrote.

When asked by lawmakers if the $1.7 billion payment has caused Dunford to reassess his view of the region, the top military official bristled.

"This specific transfer of money has not forced me to reconsider or change the advice I provide to the president or guidance I deliver to the Combatant Commands," he wrote.

Dunford said earlier this year that the White House had not consulted with him before sending the $1.7 billion to Iran.

Dunford said there is no correlation between increased financial resources and Iran's increased malign activity in the region, as well as its repeated threats against U.S. assets.

"While Iran seeks to project an image of increasing strength in the region, its malign activities remain within historic norms," he wrote. "There is a lack of information to suggest any change in the overall level of Iran's belligerent activities is directly correlated with an increase in available financial resources."