"The Olympic Games is now on a firmer financial footing thanks to the budget announced in March 2007. This should help all those involved in delivering the Games to move forward with greater confidence. "However a budget is just that - a budget not a target. The Department must still work to contain funding and achieve value for money, and should make clear what will be delivered for the public’s money. There will be a need for clear and quick decision making on funding, effective commercial arrangements with suppliers, and finalisation of designs and legacy plans." The report makes recommendations to manage risk in relation to the budget. Those which require immediate action are:
Sir John Bourn, head of the NAO, 20 July 2007
The process for setting the London 2012 Games budget has been thorough, the National Audit Office says today, but the level of public funding has increased greatly, and significant areas of uncertainty remain including the finalisation of the design of venues and the intended wider benefits.
These are the main findings in a new report by the Comptroller and Auditor General which examines the development of the budget for the Games.
At the time of the bid to host the Games the estimated gross cost was just over £4 billion, to be met by £3.4 billion in public funding and an anticipated £700 million from the private sector. The budget announced in March 2007 is now over £9 billion. It includes a number of new costs and provisions which account for much of the increase from the time of the bid, including the Olympic Delivery Authority’s programme management budget, contingency, tax and security.
The budget also includes a £6 billion increase in the public funds required to fund the Games set against a significantly reduced level of anticipated private sector funding (now £165 million). Over £1 billion of this increased funding is to meet the Games’ potential tax costs and would therefore flow back to the Exchequer. Today’s report states that the revised funding package is sufficient to cover the estimated costs of the Games, with the important proviso that the assumptions on which the budget is based hold good.
The report found that the budget process followed since London was chosen to host the Games has been thorough, and the judgements and assumptions made by the Department for Culture Media and Sport have been informed by detailed analysis and expert advice. There are, however, remaining areas of uncertainty including design specifications which have not yet been finalised, the impact of construction price inflation and how potential suppliers will respond to invitations to bid for work. The degree of uncertainty is reflected in the high level of contingency (£2.7 billion) which has been provided.
ISBN: 9780102947335 [Buy from TSO]
HC: 612 2006-2007