The National Audit Office is calling on the Department for Culture, Media and Sport (DCMS) to develop an early warning system to better identify when museums and art galleries it funds are in financial trouble.

The spending watchdog has made the recommendation in its report into the 15 museums and gallery charities that are sponsored by the DCMS.

This includes the British Museum, Victoria and Albert Museum, the Science Museum, National History Museum and the National Gallery.

The report found that since the Covid-19 pandemic they have “managed rising costs and found ways to increase self-generated income through a range of innovative and commercially minded strategies”.

However, “these institutions continue to face challenges, such as becoming more reliant on self-generated income, so they will need to prioritise good financial management and planning”.

Its report warns that the “DCMS must ensure it has the structures in place to identify early warning signs should museums and galleries start struggling to manage their financial risks, so it can intervene”.

Total self-generated income increased by 53% in real terms to £563m between 2021/22 and 2024/25 among DCMS sponsored museums and galleries. This is despite tackling post-Covid changes over this period of recovering visitor numbers and an 18% increase in costs in real terms, details the NAO.

Ways they have boosted income include venue hire, donations, membership schemes, paid-for visitor experiences and focusing on hospitality and retail.

However, they have also drawn on their financial reserves to contain costs and cut staff numbers via redundancies and not filling vacancies, the NAO warns.

NAO head Gareth Davies added: “DCMS-sponsored museums and galleries are working hard to build their own sources of funding.

“They will need to continue to develop their financial management capability to maintain this momentum and withstand future shocks.”

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