The money is accounted for.
The Sovereign Grant pays for the work of The Queen and the maintenance of the palaces along with the staff salaries for her official office staff e.g. her private secretaries but not her personal dresser. Those who clean the palaces but not those who work permanently at Sandringham or Balmoral.
The figures from 1997 show that the maintenance bill then was in the millions of pounds annually with some being set aside for a major refit at some point in the future but as the 1997 figure didn't go up for over 15 years it didn't cover the basic maintenance and so the contingency fund had to be used and now a major cost will be needed.
The Duke of Edinburgh receives an additional fund of around half a million pounds for his solo work (which will now be cut right back as he retires).
The Duchies provide the money for the private lives - so covers day to day running costs in the private homes, the staff salaries, maintenance of these homes (Sandringham, Anmer, Balmoral, Birkhall and Highgrove) - of the royals as well as the official expenses of everyone other than The Queen and Philip.
George III gave the government the income of the Crown Estates and took back a small percentage in the form of the Civil List to cover his expenses while the government agreed to pay for the maintenance of the occupied palaces and many other expenses that had been the responsibility of the monarch. That is why the government has to fund the maintenance of the palaces - it was part of the agreement when the income of the Crown Estates is handed to the government. The Queen gets back 15% now for her expenses and to cover the maintenance of the palaces while the government gets the remaining 85%.
The Duchies were separated in the Middle Ages to provide a private income for the monarch and the heir to ensure that the money was going to the right purposes xxxx for government expenses, yyyy for the monarch's private expenses and zzz for the heir's public and private expenses.
All three sources of income are audited annually and the accounts presented to parliament who do scrutinise them. Unless you wish to accuse the politicians of both persuasions over many decades of collusion there is no questions about where the money is going - it is going on the official expenses of the family and the maintenance of the palaces - but that money for the maintenance of the palaces didn't keep up with inflation from 1997 - 2012 and hence there was no contingency fund for major repairs. This is the same thing that happened with the Palace of Westminster - the contingency fund for a major refurbishment was used for regular maintenance and not the bill is in the billions of pounds when if Tony Blair hadn't frozen the payments at 1997 levels there would be sizeable moneys available and basic maintenance would have been able to be done rather than having to choose - do we fix that part of the roof or that part over there where stones have fallen off???
The government has to pay as that was the agreement made - and that is a legally binding agreement.
The accounts are published every year when presented to parliament with every penny accounted for and none gone missing.
Interesting figures from 2014:
http://royalcentral.co.uk/blogs/insight/think-a-republic-would-be-cheaper-than-monarchy-think-again-40065The Queen cost - 37.5 million pounds
The President of France cost - 91 million pounds
The President of Italy - 181 million pounds
These presidents - like the Queen - are largely ceremonial not executive.
