The leaked report is one of several independent studies that congress commissioned in May.
John Warner, the second-most senior Republican on the senate armed services committee, who last month called on the US president to pull out some troops by this Christmas, said he wanted an assessment on the capability of Iraq's military and police forces because their success is considered by George Bush's administration as necessary for US troops to leave.
General Jones, who was also formerly Marine Corps commandant, is scheduled to testify before congress on Thursday.
'Dysfunctional and sectarian'
His report says militia infiltration in the police force, overseen by a "dysfunctional and sectarian" interior ministry, renders it unable to provide security to civilians.
"Its ability to be effective is crippled by significant challenges, including public distrust, sectarianism [both real and perceived], and a lack of clarity about its identity - specifically whether it is a military or a police force," the report says.
"Sectarianism in its units undermines its ability to provide security; the [police] force is not viable in its current form."
It is a sentiment echoed by a senior member of congress who on Wednesday demanded the US stop providing funds and weapons to Iraqi forces.
"It's just a bad policy to train and equip Iraqi forces and policy makers should resist equipping forces in a failed state and must resist adding further fuel to the fire that is raging in Iraq," Maxine Waters, a Democrat, said.
"Had the US foreign policy makers read history, they would not get involved in any war after Vietnam"
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But the Pentagon says it does "not believe it is necessary to disband the national police force".
"We also acknowledge there have been real sectarian problems within the national police force," Geoff Morel, a Pentagon spokesman, said.
"The Iraqi government is committed to fixing this problem. Has it happened at pace the US wants? No, we want it to happen sooner than it has. But I don't believe the projects should be abandoned because progress has not happened at the pace we want. We must wait until Iraq can police itself without US help," he said.
The Jones report does acknowledge that the security situation has improved dramatically in al-Anbar province and sees "signs of encouraging tactical successes in the Baghdad capital region".
It says those "circumstances of the moment" may provide an opportunity for beginning to transition US forces to a "strategic overwatch posture" in early 2008, re-tasking them to concentrate on border defence and infrastructure defence.
The leak of the report comes a day after another congressionally mandated report was formally published - after it too was leaked – giving Bush's troop "surge" strategy failing marks.
General David Petraeus, the US commander in Iraq, is set to give his assessment of the Iraq situation to congress next week.