The Olympic Delivery Authority now has extra responsibility for security
Extra security could see the cost of the London 2012 Olympics rise by up to £180m ($280.6m), but organisers say the event will meet its £9.3bn budget.
In its latest financial report, the Department for Culture, Media and Sport (DCMS) said the anticipated final cost was set to rise by an extra £21m.
But a further £110m to £160m could be spent on securing the Olympic Park and venues during the Games and afterwards.
The extra cash will come from the remaining £1.25bn contingency fund.
It is also hoped to find savings elsewhere to help pay for the extra security costs.
"As we enter the busiest and most exciting phase of the Olympic project so far, this report shows we are still on time and still on budget," Olympics minister Tessa Jowell said in a statement.
In the wake of a government review, the Olympic Delivery Authority (ODA) has been given additional responsibility for security and operations between 2011 and 2013.
These extra security tasks will cover pre-games testing, the period when the games are being held, and the immediate legacy period after the games.
The ODA is responsible for delivering the games infrastructure - such as venues, the Olympic village, media centre and other assets - and the security surrounding their building and management.
Their security responsibilities are separate from those imposed on the London Olympic Games Organising Committee (Locog).
Locog is responsible for security around the sporting event, and a separate budget of £600m budget - which includes policing costs - has been put aside for this task.