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The deal to build the 拢1 billion Olympic Village has been left in tatters as developer Lend Lease struggles to secure finance for the 拢1 billion scheme following the credit crunch.

A report by the National Audit Office into the funding of the Olympic Games out today said: 鈥淭he Olympic Delivery Authority was expecting to finalise the deal for the Village in December 2007, but there have been difficulties in resolving outstanding issues and securing the private sector financing for the deal in the light of uncertainties in the financial and property markets.鈥�

The NAO concluded that the financial implication for the public sector of Lend Lease鈥檚 failure to secure private financing were as yet 鈥渦nclear,鈥� with the ODA currently restructuring its deal with Lend Lease.

However, Olympic Delivery Authority chair John Armitt told the Guardian newspaper that the government had agreed in principal to stump up the money to support the construction. Armitt said: 鈥淣egotiations are going on at the moment to try and minimise the degree to which further government funding to support the village is required.鈥�

In a statement developer Lend Lease admitted: 鈥淕iven current market conditions it has taken longer than envisaged to secure project debt.鈥� It also warned that its agreement to take equity in the project was contingent upon finalising debt financing.

In the meantime Lend Lease said it had started initial construction work, funded through cost recovery by the ODA.

The developer added: 鈥淟end Lease is working closely with the ODA to finalise contractual arrangements for the project. Both Lend Lease and the ODA remain confident that these will be finalised in the short term.鈥�

The NAO report in general found that costs had risen further on the Olympics, with the latest estimates pushing the ODA鈥檚 core 鈥渂aseline鈥� budget 拢16 million beyond the agreed funding 鈥� from 拢7,095 billion to 拢7,111 billion. The report found: 鈥渢he costs for the high profile venues such as the Main Stadium and the Aquatics Centre are forecast to be higher than anticipated, with lower costs for infrastructure projects such as structures, Bridges and Highways. The Olympic Delivery Authority continues to look for cost saving opportunities to 鈥�keep within existing budgets, and has drawn the attention of funders to the potential need for a future call on contingency if it is unable to do so.鈥�

The ODA said in a statement: 鈥淲e are in ongoing discussions about the level of public investment in the Olympic Village. We expect to finalise this later in the year. It is possible, given the economic situation, that more public investment may be needed. However, this would be within the existing 拢9.325bn budget for the games so it is incorrect to say that taxpayers would pay more.鈥�