The construction of the Olympic Village in east London is expected to cost more than £1bn, and in its report published today the National Audit Office (NAO) has highlighted that a deal is still yet to be finalised.

A deal was expected to be finalised by December 2007, but there has been difficulties securing private sector finance.

Legacy plans regarding the final stadium and whether it would accommodate football, rugby or both are also awaiting finalisation, along with the security arrangements at the games.

The report goes on to say: "There will be a risk of cost overruns and loss of time unless a firm line is adopted on subsequent calls for changes in the designs for the venues and infrastructure."

Tim Burr, head of the National Audit Office, said:

"The preparations for the Games are well underway. But important challenges remain which will become more formidable as the spotlight turns to London after the Beijing Games.

Uncertainties over the deal for the village, legacy requirements and policing and security may add cost or compromise the preparations for a successful Games. The delivery bodies need to maintain a firm stance on cost and keep in sight the intended legacy benefits too."