I have given up on Google AdWords due to the exact issue you describe.
Trying to restrict my advertising budget to just one city and do a hard geographic restriction to just US IP addresses did not work. I filed 5 tickets over two weeks with Google trying to get this resolved, only to have over half my budget spent in another continent making impressions with people that will literally never buy the local specific product advertised.
Trying to restrict my advertising budget to just one city and do a hard geographic restriction to just US IP addresses did not work. I filed 5 tickets over two weeks with Google trying to get this resolved, only to have over half my budget spent in another continent making impressions with people that will literally never buy the local specific product advertised.