The Royal Opera House had less than two weeks of free reserves at the end of its last financial year, according to its most recent set of accounts, for the 52 weeks to 26 August 2012.
The charity's turnover for the year was £110m, down slightly from £112m in the previous 52 weeks. But it had free reserves of only £3.6m, equal to just twelve days’ operating costs. Of this, £1.3m came from a windfall from a dispute over VAT with HM Revenue & Customs, the charity said in its annual report.
It said that "a target level of free reserves of nearer £6m would protect against a major downturn in box office and fundraising", but that "building free reserves over the next two to three years will be a challenging task".
The charity has total funds of £204m, but most of this is tied up in its building and in "heritage assets" that would be difficult to sell.
The charity’s main sources of income dropped. Income from operations of the Royal Opera House, including box office receipts, fell from £47.1m to £45.4m, and its grant from Arts Council England fell from £29.2m to £26.4m. The charity said it expected further cuts that will reduce that grant by £7.8m over the next three years.
The charity also saw a £7m loss on its defined benefit pension fund over the period. The total deficit now stands at £12.6m.
A spokesman for the Royal Opera House said that its income had dropped because it didn’t tour last year and because its grant fell by £2.5m. He added that it was difficult to increase reserves when "expecting cuts year on year".