Olympic village is delayed by funding problems

Inspectors from the International Olympic Committee put Games bosses on "amber alert" - meaning it is giving cause for concern - after learning that financing for the £800million-plus venue is almost one year behind schedule.

A public-private funding package was due to have been completed by last September but is not now likely to be finalised until this September.

The village - which will house 17,000 athletes and officials and then be converted into 3,500 homes - is the first 2012 venue to be flagged up by the IOC's system as amber.

Official documents say that although "work on the site is commencing on schedule", the development contract with Australian firm Lend Lease has been "delayed due to commercial negotiations".

The athletes' village was the only worry in an otherwise glowing progress report given to London 2012 by the IOC during their visit last month. However, it highlights the difficulty the Olympic Delivery Authority faces as Lend Lease struggles to raise finance during the credit crunch.

Earlier this month the Evening Standard revealed that the agreed taxpayers' contribution to the venue has risen to £420 million, which seems likely to result in the ODA raiding the £2.2billion contingency fund. It has also agreed to take on a greater degree of the financial risk, funding the "vertical build" rather than just the design and infrastructure as initially intended.

It is thought Lend Lease's contribution may have dropped by £200 million though negotiations continue with the ODA, whose chief executive David Higgins is a former chief executive of the Australian firm.

The IOC's Denis Oswald, who rated London's progress at "9.75 out of 10" last month, said: "We are fully confident that the village will be ready on time and will be available for the athletes long before the Games start."

A spokesman for the ODA said: "As has been well documented the challenging economic environment presents a challenge but with physical work underway on site we remain on programme.

"The Olympic Village is about more than just housing athletes during 2012, it will be an integral part of much wider regeneration, delivering new homes and community facilities."