Although Mr Annan was personally cleared of improper influence in the awarding of a contract to the Swiss company Cotecna, the committee of inquiry's findings about his son left question marks about his stewardship of the UN, which has come under increasing pressure.
Mr Annan was defiant. "As I had always hoped and firmly believed, the inquiry has cleared me of any wrong doing," he said. Asked if he would resign, he replied: "Hell, no."
But the secretary general, who is due to retire next year at the end of two terms, could now find it difficult to push through his reform programme, and to pacify his critics.
Norm Coleman,a Republican senator, said yesterday: "His lack of leadership, combined with conflicts of interest and a lack of responsibility and accountability point to one, and only one, outcome: his resignation."
In Washington, the White House voiced cautious support for Mr Annan. Spokesman Scott McClellan said: "This is a very serious matter. We have stated that repeatedly. Congress has been looking into it as well. We continue to support the United Nations, we continue to support Secretary-General Annan in his work at the United Nations. We will carefully study the report that Mr Volcker has put forward today. We're also looking forward to seeing the final results of his investigation."
The inquiry is continuing and is due to issue its final report in the summer.
It will give its verdict on the wider issue of the conduct of the oil-for-food-programme, which was set up to minimise the impact of sanctions on Iraq by allowing Saddam Hussein to sell oil in return for food, a system open to abuse.
An interim report of the inquiry last month was critical of the UN's handling of the programme.
The report yesterday was on the specific issue of whether the award of a contract by the UN to Cotecna, which employed Kojo Annan, was free of improper or illicit influence. Cotecna was selected by the UN in December 1998 to conduct inspections of humanitarian goods entering Iraq.
The report concluded: "There is no evidence that the selection of Cotecna in 1998 was subject to affirmative or improper influence of the secretary general in the bidding or selection process."
But the report notes that UN rules were not followed: Cotecna was not asked to submit a financial statement, one that might have helped reveal the company's financial strains at the time.
Mr Volcker said: "Our investigation has disclosed several instances in which [Mr Annan] might, or could have become aware, of Cotecna's participation in the bidding process.
"However, there is neither convincing testimony to that effect nor any documentary evidence."
Mr Volcker added: "Taking all of this into account, the committee has not found the evidence is reasonably sufficient to show that the secretary general knew that Cotecna had participated in the bidding process in 1998."
But the report is critical of Kojo Annan. He left Cotecna in 1998 but, apparently unknown to the UN or his father, continued to be paid by the company until 2004.
The report said after the media disclosed his relationship with the company in January 1999, Kojo Annan "actively participated in efforts by Cotecna to conceal the true nature of its continuing relationship with him. Kojo Annan also intentionally deceived the secretary general about this continuing financial relationship." Nor had he been totally forthcoming to the inquiry about the payments.
The report adds: "Significant questions remain about the actions of Kojo Annan during the fall of 1998 as well as about the integrity of Kojo Annan's business and financial dealings with respect to the programme."
The inquiry is still looking into this.
The report concluded that Cotecna had cooperated in making documents and staff available, but it "has made false statements to the public, the United Nations and the committee".
Mr Annan's former chief of staff, Iqbal Riza, is also criticised for allegedly giving the go-ahead for the shredding of documents relevant to the inquiry. The report says an assistant to Mr Riza, who retired in December, had shredded many documents in 2004.
The shredding continued even after Mr Annan issued an order that all oil-for-food documents be preserved, Mr Volcker said.
Mr Riza "acted imprudently" and in violation of the document preservation order, the committee concluded.
UN Secretary General Kofi Annan has been cleared of wrongdoing in an investigation of charges that he influenced the UN to award aid-screening contracts in Iraq to Swiss company Cotecna Inspection Services, which employed his son Kojo Annan. The investigation was led by former US Federal Reserve Chairman Paul Volcker, who said that the investigation initiated by Kofi Annan should instead have been referred to UN's independent watchdog agency. The report issued was called by the secretary general a "second interim report" in his statement reported in the New Zealand Herald. The commission will issue its final report in the northern hemisphere summer of 2005.

While Kofi Annan was exonerated, two of his staff members, Iqbal Riza and Dileep Nair, were criticized by the report. Riza allegedly shredded documents related to the contracts under investigation after the secretary general ordered that they be retained. The New York Times said that Nair was "faulted for appointing a person to a high-level post with oil-for-food responsibilities who did almost no work on the program".

According to the New York Times, the Secretary General said "I am deeply saddened by the evidence to the contrary that has emerged, and particularly by the fact that my son had failed to cooperate fully with the inquiry". The Guardian reports that Annan's son concealed from his father the fact that Cotecna continued to pay him for 6 years after "he left Cotecna in 1998". It was not clear from the Guardian report why Cotecna was paying Kojo Annan if he had indeed left the company.

Asked whether he planned to step down as Secretary General, as called for by US Republican Senator Norm Coleman, among others, Kofi Annan responded, "Hell, no!" according to Ewen MacAskill of the Guardian, as well as an unattributed Sydney Morning Herald article.  Senator Coleman continued to press forward with his criticism of Annan and calls for his resignation despite the report's findings.