Millions of dollars of major projects could be put on hold by the City of Vincent to make up for an embarrassing $3.2 million deficit in its recent budget.

Fairfax Media reported two weeks ago the Department of Local Government had asked the council to explain the bureaucratic bungle, which saw the city incorrectly report a $3,199,799 deficit.

Leederville was the second fastest selling suburb in Perth.

The city has until August 31 to respond to the department.