The National Audit Office (NAO), Britain's spending watchdog warned, the £9.3 billion budget could be under threat because of uncertainty over construction deals, security and the future use of the Olympics Park.

The report also raised the bleak prospect of venues, including the 80,000-seat Main Stadium, being left to decay after the sporting showcase ends, as happened in Athens.

The NAO said the Olympic Delivery Authority (ODA) faced "formidable" challenges to ensure it staged the 2012 Games without busting the budget, already four times the Government's original £2.4 billion estimate.

Major problems included the lack of a deal for construction of the £800 million-plus Olympic Village to house 17,000 athletes and officials in Stratford.

The ODA agreed an initial deal for Australian development firm LendLease to finance and build the village, which would be converted into 3,500 homes after the closing ceremony.

But the company has struggled to raise private sector money because of the credit crunch meaning work is being done at taxpayers' expense.

It warned there was a possibility the deal would  "fall through".

The NAO also highlighted concerns over the 'legacy' plans for five venues and the Olympic Park - a key factor in London's bid winning the Games.

Using the stadium as an example, the 52-page report said it was still not clear if it would eventually be used football, rugby, athletics or a combination of sports.

In a damning conclusion, it said: "The longer the legacy requirements remain unclear, the harder it will be to accommodate them in the design and construction of facilities, and the more likely it is that, through expediency, legacy objectives will be compromised by the need to deliver the Games on time."

Olympics officials were also criticised for failing to set out fully-costed plans for policing and security of the Games, despite concerns about the terrorist threat.

Tim Burr, head of the NAO, said the ODA was making "good progress' on a 'complex and challenging" site.

But he said: "'Important challenges remain which will become more formidable as the spotlight turns to London.

"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."

The NAO report echoed a study by the London Mayor's Olympics advisor David Ross, who this week warned the budget could be "inadequate" because of the deepening credit crunch.

John Armitt, the chairman of the ODA, told insidethegames:  “I welcome the National Audit Office’s recognition that good progress has been made in preparing the Olympic Park site in the last year.

"We have started construction early and are on track, endorsed recently by a positive report from the International Olympic Committee (IOC).

“As the report highlights, there are cost pressures in some areas.

"Equally there are potential savings in others.

"Overall we remain within the budget set out by Government.

The project is well managed and I am confident we can deliver as we enter the big build phase.

"Given the challenging economic environment, we are in ongoing discussions about the level of public investment in the Olympic Village. "We expect to finalise this later in the year. Work has started on site and this will be a world-class development capable of delivering returns on any investment when the homes are sold after the Games.

"75p of every pound we spend is for long-term regeneration so a great deal of work is already being done to create a lasting legacy for the project.”

To read the full report click here  Full Report (739 KB).