LONDON, Feb 2 The British government must set a final budget for the London 2012 Olympics

LONDON, Feb 2 (Reuters) The British government must set a final budget for the London 2012 Olympics as a matter of urgency to ensure the successful delivery of the Games, a report by independent auditors said today.

The National Audit Office's (NAO) report sharply criticised ministers for failing to decide how to split funding between the Treasury, the national lottery and local taxpayers in London.

''There are a number of areas of risk that will need to be managed but a major risk is the lack of final agreed cost estimates and an accompanying funding package, and this will inevitably have a detrimental impact on the programme if it is allowed to continue,'' the Audit Office said.

The report comes a week after parliament's Culture, Media and Sport committee also criticised the government's management of the Games' finances, saying budget figures were ''seriously outdated''.

The euphoria of winning the right to stage the Olympics was quickly replaced by high-profile resignations and rows over finances in 2006, culminating in Olympics Minister Tessa Jowell admitting that the budget for building the infrastructure had risen by 900 million pounds ($1.77 billion) to 3.3 billion pounds ($6.50 billion).

The report, the first in a series on the preparations of the Games, examined which mechanisms had been established by the government and the Olympic Delivery Authority to ensure value for money and whether costs had been adequately assessed.

NATIONAL LOTTERY At present some 1.5 billion pounds is earmarked to come from the national lottery, 625 million from local tax payers, 250 million from the London Development Agency, and the rest of the cash from central government.

Any increase in the budget is already being disputed between London Mayor Ken Livingstone and Jowell.

Livingstone announced last December that he would freeze the Olympics element in local taxes to prevent Londoners being hit by a ballooning Games budget.

A spokesman for Jowell's department said: ''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 the Department for Culture, Media and Sport to scrutinise the 2012 budgets.'' The report concluded that key relationships and working arrangements between the many groups and organisations involved in the Games were still being developed.

It also noted, however, that progress had been made in putting in place the organisations to deliver the Games and that the layout of the Olympic Park had been finalised.

The Olympic Lottery Distributor said on Friday that lottery games had raised 100 million pounds for the Games and it now expected to raise 118 million in income by March 2007 towards the planned total of 1.5 billion pounds.

REUTERS SAM HT1934