The annual Sovereign Grant report shows that the King's royal household has not yet met its diversity target for staff, but Buckingham Palace has said it is "committed to making progress in this area" as it raised its target for the next two years.
The number of employees from ethnic minority backgrounds remained at 9.7 per cent for the second year in a row, below its target of 10 per cent by the end of 2022.
But the Palace said just over 12 per cent of senior household roles or non-executive directors on the Lord Chamberlain's Committee were from ethnic minority backgrounds.
The King's household has now set a new target of 14 per cent of all employees by 2025.
A Buckingham Palace official said: "I recognise we are not where we would like to be and we are committed to making progress in this area. And hence why we've raised the target to 14 per cent having got close to our 10 per cent figure. We now need to set out the scale of our ambition to really make headway in this space."
The report shows that a new Inclusion and Diversity strategy and action plan has been implemented, offering training and education programmes, particularly for senior leaders.
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Meanwhile the Prince and Princess of Wales's household has increased its percentage of staff from an ethnic minority background, up 16.3 per cent from 13.6 per last year, according to information shared by the Duchy of Cornwall.
Around 18 per cent of people in the UK belong to a Black, Asian, mixed or other ethnic group.
Announcing the annual Sovereign Grant report, which breaks down how taxpayers' money is spent on official royal duties, Sir Michael Stevens, Keeper of the Privy Purse said it related to "a year of grief, change and celebration, the like of which our nation has not witnessed for seven decades".
The report revealed that the Palace's efforts towards sustainability were more successful, with a 19 per cent decrease in natural gas and heating emissions and a 43 per cent drop in business and travel emissions – largely due to fewer overseas visits on behalf of the Government.
The heating has been turned down at royal homes to cut emissions, with a limit of 19C during the winter and 16C when rooms are unoccupied.
Sir Michael said the initiatives were "in line with His Majesty’s clear leadership priorities".
A Palace spokesman said royal travel is increasingly being powered by electric vehicles and sustainable aviation fuel, where available.
According to the report, the royal family carried out 2,710 engagements between 1 April 2022 and 31 March this year, during a period of transition from one reign to the next.
Expenditure increased by £5.1million to £107.5 million compared to the previous year – in part because of the change of reign, inflation and the ongoing costs of reservicing works to update the electrical cabling, plumbing and heating at the Palace. The additional cost was met from the Sovereign Grant reserve.
Sir Michael said: "That has inevitably entailed additional burdens on resources to ensure that these historic events were delivered safely and smoothly, and that the change of reign was effected as seamlessly as possible at a time of great national and international interest."
The extraordinary events of the past 12 months saw a reduction in spending on travel – down £600,000 to £3.9 million, but an increase in housekeeping and hospitality from £1.3 million to £2.4 million, reflecting the events held at the Palace as part of the Platinum Jubilee and funeral of the late Queen.
The report suggests the cost of the royal family is just 77p per person, rising to £1.29, including the separate fund for reservicing the Palace.
In another update, officials confirmed that the King and Queen still intend to move into Buckingham Palace when works on their private apartments are completed in 2027. The apartments are situated in the Palace's North Wing, which is not due to be finished until the end of the ten-year renovation process.
The Sovereign Grant, which is calculated as a percentage of the revenue of the Crown Estate, remained unchanged from last year at £86.3 million.
A core element of £51.8 million funds the King's official duties and his household, and an additional £34.5 million pays for ongoing reservicing costs for the palace.