Preparations for the London Olympics in 2012 still face "formidable" challenges which may incur additional costs, the public spending watchdog have warned.

Unresolved issues over construction deals, how venues will be used post-2012, and security for the Games could all put the £9.3 billion budget at risk, the National Audit Office (NAO) said.

In a report, it also urged the Olympic Delivery Authority (ODA) to hold a "firm line" as plans are developed, or risk overshooting the budget.

Tim Burr, head of the National Audit Office, said: "The preparations for the Games are well under way.

"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."

The NAO highlighted the lack of a deal for construction of the Olympic Village in east London, which is expected to cost more than £1 billion.

The ODA had expected to secure a deal by last December, but there have been difficulties securing private sector finance amid the downturn in the property market.

Also awaiting finalisation are the "legacy" plans for individual venues, including the Main Stadium, where it has not been decided whether to accommodate football, rugby or both alongside athletics.

The NAO also said there was still no "firm basis" for security arrangements at the Games. Costed plans are not expected from the Home Office until the end of 2008.

The watchdog's concerns echoed those voiced earlier this week by David Ross, the tycoon appointed by new Mayor of London Boris Johnson to review preparations for the Games.

The report added: "With the fixed deadline for the start of the Games, a degree of pragmatism on the part of the Olympic Delivery Authority has been necessary in balancing the need to move forward the construction programme against the possibility of stakeholders' requirements changing.

"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."

Tory MP Richard Bacon, a member of the Commons Public Accounts Committee, called for the security issues to be resolved quickly.

"The success of the 2012 Olympics depends on the ability of athletes and spectators to enjoy the Games without fear. Their security is non-negotiable," he said.

"We all expect the Games to be safe, but it is hard to understand why there is not a firm basis for taking forward the wider security arrangements for the Games.

"It is almost three years since London won its bid to host the 2012 Olympic and Paralympic Games, yet the Olympic Board still does not have a complete analysis of the risks involved.

"Three years is more than enough time to come up with a coherent breakdown of risks and it is odd that this hasn't been done yet."