The Queen's household is down to its last £1m in royal reserves, and needs to get a grip on slashing costs, increasing income and sort out a backlog of repairs, a Commons committee has said.
Margaret Hodge, the Public Accounts Committee's chairman, also criticised the Treasury for failing to be more actively involved in reviewing the household's financial planning and management.
"We feel that the Queen has not been served well by the household and by the Treasury, which is responsible for effective scrutiny of the household's financial planning and management," Hodge said.
"We believe that the Treasury has a duty to be actively involved in reviewing the household's financial planning and management - and it has failed to do so.
"The household needs to get better at planning and managing its budgets for the longer term - and the Treasury should be more actively involved in reviewing what the household is doing."
In April 2012 the Sovereign Grant replaced the old way of funding the Royal family through the Civil List and various Government grants.
Income increased during the last financial year, but Hodge said that expenditure had only been reduced by 5%.
Hodge also highlighted the large amount of work needed to maintain "nationally important heritage properties", like the Victoria and Albert Mausoleum, a monument of national importance, which has been waiting 18 years for repair work.
The document said when assessed in 2012, 39% of the royal estate's buildings were below what the household thought was an acceptable condition - and the current position is likely to be worse.
Hodge said: "The household must get a much firmer grip on how it plans to address its maintenance backlog.
"It has not even costed the repair works needed to bring the estate back to an acceptable condition, and the Treasury did not require an estimate. Again, the Treasury has an oversight role here."
Asked if the Royal Family had too many palaces, Mrs Hodge told the BBC Radio 4 Today programme: "I don't think we even looked at that - we wouldn't have dared to look at that."
Responding to the suggestion that the problem had been allowed to develop because the Treasury and others tread too carefully around issues involving the Royal Family, she went on: "It may be a thing for another year.
"This is the very first year that there has been much stronger accountability, visibility and transparency around the sovereign grant, so this is our first dip of our toe into the water."
A Buckingham Palace spokeswoman said: "The move to the Sovereign Grant has created a more transparent and scrutinised system, which enables the royal household to allocate funding according to priorities. This has resulted in a more efficient use of public funds.
"The royal household was charged by the PAC in 2009 to generate more income to supplement the funding it receives from Government. This has been done successfully. In 2012-13 the Household generated £11.6 million in comparison with £6.7 million in 2007-8. Work on income generation continues.
"A significant financial priority for the royal household is to reduce the backlog in essential maintenance across the occupied royal palaces. Recent examples of work include the renewal of a lead roof over the royal library at Windsor and the removal of asbestos from the basement of Buckingham Palace. The need for property maintenance is continually assessed."
A Treasury spokesman said: "The new arrangements established by the Sovereign Grant Act have made the royal finances more transparent than ever while providing the long term stability necessary for good planning.
"The PAC's report has failed to properly account for these changes."
Anti-monarchy campaigners Republic said on Tuesday morning that the PAC had failed to take some hidden costs of monarchy into account.
Chief executive Graham Smith said: "When you start to look at security, revenue from the Duchies, costs to local councils and unpaid taxes the total cost of the monarchy is well over £200m every year. That's the equivalent of thousands of new nurses, doctors, police officers or dozens of new schools.
"MPs also need to look seriously at the absurd funding arrangements brought in by this government. The sovereign support grant ensures the monarchy's funding increases based on property prices rather than need and guarantees the grant can never go down."
"Eight years ago MPs called on the palace to open up to tourists in order to raise revenue but the palace simply refused. While the monarchy continues to exist it must be placed on an equal financial footing with any other public body. That means annual budgeting, a salary for the Queen and a drastic reduction in costs to around £5m a year."