A report by a Commons public accounts committee claimed that the Queen's advisers were failing to control her finances. MPs reported that her advisers had overspent to such an extent that the Queen's reserve fund had dropped from £35million in 2001 to just £1million.
Margaret Hodge, the committee chair, also criticised the Treasury for failing to do more to review the household's financial planning and management.
"I don't think we'd accuse anybody of profligacy but, what we are saying, is that we don't think the Queen is served well either by the royal household or, indeed, by the Treasury," she told BBC Radio 4's Today programme. "They're not balancing their books and they're dipping into their reserves."
While the committee praised the Royal Household for generating £11.6million last year - up from £6.7million in 2007/08 - it said more could be done.
"The Queen can attract income - visitors to Buckingham Palace - but Buckingham Palace is only open 78 days a year, they only have half a million visitors," said Mrs Hodge.
"Compare that to the Tower of London – they have over two million visitors."
Boosting annual visitor numbers could help pay for improvements to both Windsor Castle and Buckingham Palace. Both are said to be in urgent need of repair, and staff have reportedly had to catch rain in buckets to protect art and antiquities.
"The household must get a much firmer grip on how it plans to address its maintenance backlog," said Mrs Hodge. "It has not even costed the repair works needed to bring the estate back to an acceptable condition. Again, the Treasury has an oversight role here."
In April 2012, the Sovereign Grant replaced the old way of funding the Royal family though the Civil List and various Government grants.
A Buckingham Palace spokesman said the sovereign grant had made the Queen’s funding "more transparent and scrutinised" and was resulting in a "more efficient use of public funds".
He said that repairing the royal palaces was a "significant financial priority", and that the royal household had almost doubled its income to £11.6 million since 2007.