It found that despite targets being set by the Secretary of State for Culture, Media and Sport in 2002 to halve the total balances of the National Lottery Distribution Fund, too few awards are being granted.

Since the start of the National Lottery nearly a decade ago, the balances of the Fund have steadily increased, until 1999 when they peaked at £3.7 billion. This figure has fallen slightly with 15 distributors holding the current balance of £2.7 billion, some 61% of which is shared by The Heritage Fund and the New Opportunities Fund.

According to the National Audit Office report, after taking into account the uncertainties and risks in managing funds, distributors have the scope to make commitments worth nearly £450 million, although it admits it would take time to feel the impact due to considerable gaps between the time a commitment is made and when a grant is actually paid.

It recommends that distributors look at establishing interim targets for reducing balances in the short-term, and in the long-term hold no more money than is necessary to cover short-term difference between income and expenditure.

Head of the National Audit Office, Sir John Bourn said: “Balances held in the National Lottery Distribution Fund are not delivering the intended benefits in the community. Although the balances have started to fall, there is scope to reduce them further and those distributors with the largest balances, in particular the Heritage Lottery Fund and the New Opportunities Fund, can make the biggest contribution. However the Department for Culture, Media and Sport also has a role in helping distributors to manage effectively the opportunities and risks in seeking to reduce balances.”