But it explained the extra cash was available because it had under-spent in the previous year.

Not-for-profit urban regeneration company Opportunity Peterborough, which received £1.8 million of public cash in the last financial year, has said the overspend was "intentionally achieved" following a £235,000 underspend in the preceding year.

The deficit was revealed in OP's yearly accounts, which were released as part of the company's annual review yesterday.

Director of strategic growth Steve Bowyer told The Evening Telegraph that the deficit was a result of OP initiatives, such as the Integrated Growth Strategy (IGS), which were initially earmarked to go ahead in the April 1, 2006 to March 31, 2007 financial year, being "re-programmed" to the following 12-month period.

Mr Bowyer said: "The re-programming was not to the detriment of the city. It was about getting the right job done at the right price. The loss needs to be looked at in the context of the previous year's £235,000 surplus."

OP, which is jointly funded by Peterborough City Council, the East of England Development Agency, the Department for Communities and Local Government and English Partnerships, reported a total spend of £2.16 million last year, compared to an income of £1.86 million.

Last year, Opportunity Peterborough received £250,000 from the city council.

Mr Bowyer said it was essential that projects such as the IGS, which is being incorporated into the council's Core Strategy, were not started prematurely in order to establish a "clear way of growing".

After a year of rigorous planning and consultation, the final recommendation of the IGS was the construction of an additional 17,000 homes by 2026, leading to the creation of two urban extensions to the south and east of Peterborough.

In addition, the IGS envisaged the creation of 24,600 jobs on 80 hectares of designated employment land over the next 18 years. Reflecting on OP's performance in the last financial year, Mr Bowyer said: "It was a successful year, both in terms of planning and delivery. Having said that, I expect the current year to be even more successful."

By April 2009, Mr Bowyer said he hoped a planning application would have been submitted for a 450-home Carbon Challenge site, work will have started to transform Cathedral Square, and plans for North Westgate, the South Bank and the Station Quarter should have reached a more advanced stage.

He said: "I'm aware that people say they have heard this all before, but OP wants the right development for the city.