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The government's failure to provide a final budget for the London 2012 Olympic Games poses a major threat to the entire project's success, a National Audit Office (NAO) report has warned.

The report, published today, says that the additional £900 million on top of the original costings announced by culture secretary Tessa Jowell last November casts doubt about the final cost of the Games.

This uncertainty creates a major risk to the preparation process which should be immediately rectified, NAO chief Sir John Bourn said today.

"The London Olympic and Paralympic Games may seem a long way away, but with a programme of this magnitude it is vital to keep the momentum up," Sir John commented.

"Finalising the budget should be a priority to allow the Olympic programme to move forward with greater confidence and certainty."

Responding to the report, shadow sports minister Hugh Robertson said: "It is entirely the government's fault that the bid budget was so incompetently drawn up and it is their mismanagement of the inevitable aftermath that is doing so much damage to the Olympic process."

Norman Foster, Liberal Democrat spokesperson on culture, media and sport, said that the report warned of "a vicious cycle created by uncertainty over the 2012 Games budget".

"The longer the budget remains opaque, the more the Games are likely to cost," he said.

A spokesperson for the Department of Culture, Media and Sport (DCMS) emphasised that "we are committed to as much transparency as possible on the finances for the Games".

"We have made excellent progress to date with all major milestones met, a point recognised recently by the International Olympic Committee.

"We have been engaged in a rigorous review of costs since we were awarded the Games in July 2005 and Tessa Jowell has invited the NAO to work with DCMS to scrutinise the 2012 budgets."

Today's report follows concern expressed last week by MPs on the Commons culture, media and sport select committee. Their report into the project admitted disappointment that the cost estimates had been found wanting so early on, but reiterated their faith that the final event would be "outstanding".