According to the National Audit Office (NAO), the total budget for the celebrations now stands at just over £80m, more than double the original amount set aside.
Minister for Sport and the Olympics Hugh Robertson said: "London’s opening and closing ceremonies are a once-in-a-generation opportunity to showcase the very best of our country to four billion people around the world and have a potential advertising value of £2-5 billion.
"To get the ceremonies absolutely right, and boost the Games business and tourism legacy, we are putting additional investment into our ceremonies."
The additional cash will be taken from the £9.3bn public sector funding package for the Games.
The report showed the estimated cost of venue security has also nearly doubled in the last year, rising by £271m to £553m after the number of security guards was revised from 10,000 to 23,700.
"As was always planned, the government and Locog have now undertaken detailed analysis of the numbers of security staff required to protect the more than 100 Olympic venues," added Robertson.
"As a result, to ensure a safe and secure Games, they have revised the numbers of trained staff required. We are therefore investing additional funds in providing nearly 24,000 venue security personnel plus specialist security equipment."
The Olympic Delivery Authority is on course to deliver its work within budget, but head of the NOA Amyas Morse said there is a "real risk" more money will be needed.
"The programme to deliver the venues and infrastructure for the 2012 Games remains on course, so it looks as if value for money will be achieved in this area," she said.
"However, not everything is rosy. The government is confident that there is money available to meet known risks, but, in my view, the likelihood that the Games can still be funded within the existing £9.3bn public sector funding package is so finely balanced that there is a real risk more money will be needed."
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