It's not clear how extensive the problem is. Apparently it affects the new Iraqi Army least. But some police units may have only 40 percent of their officially reported personnel, and some local security forces, such as watch units for pipelines and other infrastructure, may be as low as 20 percent.
Ethnic cleansing is another growing problem. It's actually nothing new in the region, and has been going on for thousands of years. For the last few decades, Saddam made ethnic cleansing a state policy. In particular, he moved Sunni Arabs into Kurdish areas containing oil fields. Kurds and Shia Arabs, in general, were moved away from sensitive areas in general. Now the Kurds and Shia Arabs want to move back. But it's gotten worse than that, with clans and tribes consolidating by leaving areas where they lived intermixed with Sunni Arabs. Because the Sunni Arab population contains so many murderous diehards (who want Sunni Arabs back in power), it is not healthy for democratic minded people to live nearby. Al Qaeda considers democracy "un-Islamic" and most Sunni Arabs prefer a Sunni Arab dictatorship (as do most of Iraq's Sunni Arab neighbors). As a result over a million people have moved in the past two years, and more are doing so each month. Often, this is accompanied by violence.
Speaking of ethnic cleansing, for the last few months, American and Iraqi troops have been chasing al Qaeda around western Iraq, particularly along the Syrian border. Better sources of information from Iraqi civilians living in the area (who are tired of the violent and intolerant al Qaeda foreigners living among them), has made it possible for the fleeing al Qaeda to be quickly found in their new base, and chased once more. It's gotten so bad that al Qaeda is moving some of its operations out of Iraq. But moving people to Syria or Jordan is dangerous, because either of those countries can be persuaded by the U.S. to arrest al Qaeda members, and turn them over to the Americans. This has already happened in both nations. While al Qaeda still has a lot of street cred with the kids, it's become much less popular with adults. All those dead Iraqi civilians, blown apart by terrorist bombs, has given al Qaeda a much darker, and less likable, image. Arabs have gotten a close look at their heroes, and they don't like what they see.
AlthoughIraqi security forces have been operating with growing skill in combat, they still lack an adequate administrative structure and trained administrative personnel. As a result, money intended to pay troops, police, and other security personnel, is usually dispensed through the chain-of-command. That administrative weakness, coupled with a well-entrenched tradition of corruption means that many military, police, and security units are plagued by "empty files" - that is, there are a lot of personnel who only exist on paper. This allows commanding officers to keep the pay of the non-existent personnel.