A related and pressing problem has been the financial crisis created by the arrears owed by the United States and other nations, a crisis exacerbated by the expense of increased peacekeeping operations. Even as the nations of the world have been expanding the UN's role as peacekeeper, its ability to fund such operations has been hampered by nonpayment of UN dues. American dissatisfaction with the UN has led to opposition within Congress to payment of UN dues and resulted in unyielding U.S. opposition to the reelection of Boutros-Ghali as secretary-general. Kofi Annan, who succeeded Boutros-Ghali in 1997, worked to streamline UN operations and reduce costs, in part to restore American confidence and interest in the organization. In 1999 the U.S. Congress passed legislation that would pay some of the nation's back dues, but it also called for a further reduction in the assessment that the United States is expected to pay. An agreement in Dec., 2000, called for a reduction in U.S. dues to 22% of the UN's budget. In 2000, U.S. arrears had reached $1.3 billion, according to UN calculations, but by the end of 2004 that had been reduced by more than 80%.

In 2004 the UN's reputation was tarnished by revelations about corruption in the oil-for-food program that allowed Iraq, beginning in 1996 and ending after the U.S.-led invasion, to export oil to generate income that was to be used to purchase food and other humanitarian relief. Saddam Hussein's government received sizable kickbacks through the program (although the money Iraq earned through smuggling oil abroad was much greater), and many outside Iraq illicitly profited as well. A detailed UN investigation into the program, led by Paul Volcker, began in 2004, and it released its final report in 2005. The investigation accused the UN official who had headed the program of personally benefiting from it, and faulted the conduct of others, including two of Annan's close advisers. The integrity of Annan's son, who benefited from employment and payments from a company involved in the program, was questioned, although Annan himself was not accused of benefiting or of manipulating the program to benefit anyone. However, Annan was criticized for having exercised inadequate oversight (as was the Security Council) and for having failed to make a thorough inquiry into the affair when questions first arose about it.

Also in 2005 Annan attempted to win international support for a group of comprehensive reforms within the United Nations, but agreement proved difficult to secure. UN members did approve the establishment of a Peacebuilding Commission, intended to aid war-torn nations in reestablishing political stability and economic growth. In Dec., 2005, under pressure from the United States and other wealthy nations, UN members approved a two-year budget with a spending cap for 2006 that was expected to be reached in June of that year. The intention was to link the approval of further spending to passage of management reforms by the General Assembly.

The General Assembly approved (Mar., 2006) the replacement of the UN Human Rights Commission with a Human Rights Council. The move was designed to restore credibility to the UN's human rights body, which was criticized for having included among its member nations many countries that had been denounced for violations of human rights, but the new body soon faced similar criticisms. In May the Assembly refused to approve the centerpiece of Annan's ambitious administrative reform plans for the United Nations; some modest reforms were approved in July. The budget cap, meanwhile, had been removed in June by the General Assembly. Annan was succeeded as secretary-general by South Korean diplomat Ban Ki-Moon in 2007.

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