A frank report by accountants KPMG reveals Bermuda Homes for People is ?technically insolvent? with liabilities of $1.2 million it cannot meet.

The report recommended Government provide an immediate bail-out and then review how best to take the project forward.

In mid-January the Board had applied for $5 million of Government funding which was revised to a maximum of $3 million. The report said Clifford Schorer, who had provided seed money, had stopped putting in any more cash and had resigned on January 15.

He is now claiming $733,000 paid by him on BHP?s behalf.

Of that sum Mr. Schorer is seeking $294,000 as project executive between July, 2003 and December, 2004, $43,000 for travel expenses and office and secretarial expenses of more than $113,000.

But the report said: ?We believe further consideration should be given to the validity of Mr. Schorer?s claim for the time and expenses of himself and his staff before BHP agrees to pay this amount.?

And the report found that BHP had no formal accounting system and there wasn?t a complete record of payments ? which were always made by Mr. Schorer. Nor was there a purchase ledger.

?It was presumed that all invoices passed to Mr. Schorer had been paid in full. BHP has since discovered that several invoices were unpaid and have contacted vendors to determine the level of BHP?s third party creditors.?

Also owed thousands of dollars in unpaid salary were project director John Gaston and project manager Brian Rowlinson but yesterday board chairman Richard Winchell said since the report was compiled a donor had come in and paid those salaries amounting to nearly $40,000.

The report called for stricter accounting controls which were needed immediately but said the structure of BHPs management was basically sound.

It said BHP?s board had been concerned that the company should not be trading while insolvent and was keen to get additional funding to stave off closure.

Not included in the debt total is another $750,000 BHP says it needs for relocation of tenants at the Ship?s Wharf site.

The report said the figure had not be verified and it was possible to use compulsory purchase orders.