The United Nations is in dire need of reform, an independent commission has found, but whether it's able to reform itself when some of its top officials are part of the problem remains to be seen.

The Independent Inquiry Committee probing the U.N.'s Oil-for-Food (search) program has found that not only the secretariat's office but other top-level officials didn't pay enough attention to the corruption and scandal going on within the program.

In a scathing report released Wednesday, the IIC, headed by former Federal Reserve Chairman Paul Volcker (search), found that the United Nations was guilty of "illicit, unethical and corrupt" behavior.

Click on the links below to read sections of the report:

Volume I - The Report of the Committee (pdf)
Volume II - Program Background (pdf)
Volume III - United Nations Administration, Part I (pdf)
Volume IV - United Nations Administration, Part II (pdf)
Impact of Oil-for-Food Program on the Iraqi People (pdf)

Not only was Secretary-General Kofi Annan (search) found partly to blame, but Louise Frechette (search), the deputy secretary-general, also was fingered as being negligent. Click here to read a key section of the report dealing with U.N. management failures.

While Annan has said he has no plans to resign, up until this week, Frechette had largely escaped public criticism from the Volcker investigation for her role in the Oil-for-Food scandal.

But the IIC's most recent report slammed Frechette for failing to take action against her subordinate, Benon Sevan (search), the former head of the Oil-for-Food program who is accused of taking at least $160,000 in bribes associated with the program.

The report found that while Sevan was in charge of the program, there were "various management failures and challenges" occurring within the Office of the Iraq Programme (OIP). Frechette also had overall responsibility for the secretariat's role in the program.

Sevan said in a statement that the accusations against him in the report are "misguided, unsubstantiated and false." Click here to read Sevan's statement (pdf).

The report also says that the inconsistent explanations by Annan, Frechette and then-chief of staff Iqbal Riza — who was privy to many discussions and dealings with Oil-for-Food — "demonstrate a basic confusion within the highest offices of the secretariat."

It was Frechette's job to keep Annan in the loop about what Sevan was doing and to approve regular reports required as part of the program's management. But the report found that she saw no reason to get involved if it was thought the program was being "well run."

Frechette tried to deny any responsibility for oversight or that there were problems, the report said, but Volcker didn't accept those explanations in issuing a report that said the world body was overwhelmed by the Oil-for-Food program.

"The deputy secretary-general knew about — but did not act upon — many reports of major program violations," the Volcker report states. "In the final analysis, Mr. Sevan ran a $100 billion program with very little oversight from the supervisory authority that created his position."

Despite the chiding, Volcker told FOX News that reform is up to Frechette and her boss.

"If they are going to be there, they've got to change it, or they've got to be a part of it," Volcker said. "In the end, it's going to be the General Assembly and the Security Council, somebody, the organization needs leadership for drastic reform — that's the test."

Click in the video box above for a report by FOX News' Eric Shawn.

Frechette is already the United Nations' top bureaucrat in charge of managerial reform; she was named chairman of the U.N.'s steering committee on reform by Annan himself.

And while the report did not find any smoking gun showing that Annan had something directly to do with his son's company, Cotecna (search), winning lucrative Oil-for-Food contracts, it did find that the secretary-general didn't do enough to probe deeper into any potential conflicts of interest he and his son, Kojo, may have had.

The Volcker panel said Kojo Annan (search) used his father's "name and position" in 1998 to buy and deliver a car at reduced price. It said he had asked beforehand whether he could buy the car in his father's name, but no evidence showed the secretary-general ever agreed.

"The findings of today's report must be deeply embarrassing to all of us," Annan told the Security Council Wednesday. "None of us — member states, secretariat … can be proud of what it has found. Who among us can now claim that U.N. management is not a problem or is not in need of reform?"

The report does reveal that Kojo Annan saved $20,000 by improperly claiming that a new Mercedes he bought was his father's, getting a diplomatic discount and saving customs fees.

Through a representative, Kojo Annan said he is pleased the report confirmed that his father had no knowledge of Cotecna's bid for the contract. Click here to read Kojo Annan's statement (pdf).

"My father is a man of impeccable character who has worked tirelessly for the United Nations for many years," Kojo Annan said in a statement. "His integrity is beyond reproach."

Kojo Annan's representatives said the IIC report's "so-called evidence" of his contact with the U.N. procurement department "is flimsy at best." They said he "regrets" using his father's name to get the car and "is sorry for any embarrassment this may have caused the secretary-general" but that it has nothing to do with the Oil-for-Food program.

Volcker found both Annan and Frechette derelict in their managerial responsibilities, which may bring about more questions about the role they play at the United Nations as more than 170 heads of state arrive in New York next week for the world body's 2005 World Summit to debate the secretary-general's major reform plan and how the organization can better tackle global poverty, human rights and terrorism.

FOXNews.com's Liza Porteus, Eric Shawn and Jonathan Wachtel contributed to this report.