It was meant to restore the battered reputation of the heir to the throne, but yesterday's report into the aftermath of the Paul Burrell trial may not be quite as reassuring as Prince Charles hoped. Nick Morrison reports.

PINNED to the lapel of his navy blue suit, the heir to the Windsor throne was sporting a martenitza, a traditional red and white badge. It may have been a nod to his Bulgarian hosts, who wear the martenitza during March, but Prince Charles may also have felt in need of a bit of the luck the badge is said to bring.

As he greeted his distant cousin, Prime Minister Simeon Saxe-Coburg Gotha, once known as King Simeon II of Bulgaria, the Prince of Wales can't have helped but let his mind wander to events more than 1,200 miles away, events which could leave his reputation permanently tarnished, and could even cast doubt on his suitability to inherit his mother's throne.

Even before it was published, yesterday's report into the aftermath of the Paul Burrell trial had been dismissed as a whitewash, and when the 111-page document was finally unveiled - three months later than originally promised - there was little to dispel that impression. As a damage limitation exercise, it does not appear to have worked.

The inquiry, headed by the Prince's private secretary Sir Michael Peat, was set up amid a welter of lurid revelations following the collapse of Burrell's trial on charges of stealing from the estate of his late employer, Diana, Princess of Wales. Stories of how Royal servants supplemented their meagre incomes by selling off official gifts; of how the Prince's most trusted aide, Michael Fawcett, was said to be the 'fence' in this trade; of how servants played dressing up games with the late Princess' ball gowns, and, most damagingly of all, of how an allegation of rape was covered up by the most senior courtiers - all conspired to paint a picture of a court mired in dubious financial shenanigans and sexual depravity.

For a Prince who had spent the previous five years painstakingly rebuilding his public image after Diana's death, this was a devastating blow. All the effort at rehabilitation - masterminded by his public relations advisor Mark Bolland - which had even seen a gradual acceptance of Camilla Parker-Bowles, had been undone at a stroke. Perhaps most humiliatingly of all, along with the impression of being barely in charge of a household out-of-control, the Prince became an object of ridicule when it emerged Fawcett squeezed the royal toothpaste onto the royal toothbrush, and held the royal bottle when his master gave a royal urine sample.

But, contrary to the Prince's intentions, it seems the report is unlikely to quell the furore, and St James's Palace is now bracing itself for further - and more damaging - revelations. The principal fear concerns Fawcett himself, said to know Charles's most intimate secrets.

A number of newspaper groups are known to have approached Fawcett, with a figure of around £1m being bandied around as the price of publishing his story. It is presumably in an effort to persuade the former valet, who resigned following the report's publication, to keep his counsel that Fawcett has been offered work with the Prince's household on a freelance basis. Fawcett, who had been described as "indispensable", also left with a glowing reference and a rumoured pay-off of up to £1m, which must help cushion the blow of being branded a bully who took advantage of his position to enjoy a lavish lifestyle.

But while the report contained misgivings over the way the Prince's household was run, it found no evidence of serious wrong-doing, and, despite protestations that it is no whitewash, this may eventually prove to be as much as cause for concern for Charles as of relief.

For, by tempering the criticism, the report may open the way for disgruntled former, and possibly current, employees to take the opportunity to wreak revenge on their enemies in a court renowned for its petty jealousies and personal slights. And by fudging the sacrifice of Fawcett, a man who may have ruffled more feathers than most, the Prince has done nothing to present himself as a man determined to clean up his backyard.

After Fawcett's potential to destabilise the succession, most worrying for the Prince and his court are the allegations of George Smith. The former Welsh Guardsman, and survivor of the bombing of the Sir Galahad in the Falklands War, became a valet to the Prince, and it was in this role that he says he was plied with drink and then raped by a senior courtier in 1989.

When these allegations first came to light, in 1996, the Prince asked his divorce lawyer, Fiona Shackleton, to investigate, but no action was taken. Yesterday's report says it was wrong to treat the claims so dismissively, but found no evidence of a deliberate cover-up.

This may not satisfy Smith, who has already been the subject of smears that he is mentally unstable and rather too fond of the drink, and the Prince must now be anxiously awaiting his former aide's next move. Only last week Smith is reported to have said: "Being an internal inquiry, the full truth is not going to be told. I have not got faith in them properly investigating and fully reporting on the rape."

But Royal biographer Christopher Warwick believes thinks Charles may have weathered the storm. "As head of the household he bears responsibility and he was not going to come up smelling of roses but I don't think it has damaged him," he says.

"If he didn't know what was going on as head of the household then he jolly well should have. He has to move on from this whole affair, make the changes and make sure that this inquiry has positive results."

And Royal watcher Lord St John of Fawsley agrees: "Has it damaged his reputation? Not at all, it has increased it. It has encouraged a new kind of frankness and openness that we have not seen before. He has shown himself to be a sympathetic employer, considerate of the feelings of others and willing to make changes."

But Harold Brooks-Baker, publishing director of Burke's Peerage, believes the problems in the Prince's court may yet come back to haunt the House of Windsor. "The public will certainly perceive the lack of proper records of 180 official gifts to be a frightening harbinger for the future order of the office of monarchy for the next reign. And it is sad that the Prince of Wales has decided to escape the world's Press by visiting Bulgaria," he says.

The Prince's visit to Bulgaria may be as convenient as the Queen's recollection of her conversation with Burrell which halted his trial, so setting in motion the events leading up to yesterday's report, but it may not prove to be quite as effective as Charles hoped in getting him off the hook.

The fact the report has not silenced the critics is damaging enough in itself - but the potentially explosive revelations which may yet be lurking around the corner could see Charles's desire to succeed his mother dealt a fatal blow.