In a Parliamentary address, Minister for Community Development, Youth and Sports Vivian Balakrishnan said the organising committee was "plain wrong" in allocating just S$104 million (£50 million/$78 million) to the Games.
The budget later ballooned to S$387 million (£185 million/$289 million).
"We were plain wrong," Balakrishnan admitted.
"We underestimated the requirements and the consequential cost for several major functional areas in hosting the Games.
"You just look at the cost of feeding people, moving people, transport and logistics, that already was over S$40 million (£19 million/$30 million)."
Upgrading of sports venues and equipment, putting on the Opening and Closing Ceremonies and providing live broadcast of the Games also pushed the budget past initial estimates, Balakrishnan said.
He added that the biggest cost was in technology.
"Technology, we had a reason to underestimate because we didn't think at that point in time that we were going to host a Games which are at world standard, with world-class timing systems and information systems," said Balakrishnan (pictured left with International Olympic Committee President Jacques Rogge).
"So I've got no excuse for getting it wrong the first time."
But Balakrishnan insisted that the benefits Singapore reaped justified the massive budget increase.
"If we spent S$387 million dollars, will we get value from that expenditure?" he said
"In my mind, the answer ... is yes."
Balakrishnan claimed that Singapore's economy had received a boost during the Games, which had also developed the city-state's sporting culture and put it in the history books.
"Singapore will always be remembered as the country that hosted the world's first-ever Youth Olympic Games," he said.
"This is a rare honour.
"It's rare because there can only be one first host."
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