National Lottery fund distributors have been criticised by MPs, who complain that £2.4bn earmarked for worthy causes has been left sitting idle in the bank.
The National Lottery will be launching Olympic lottery games
Distributors had been too slow and overly cautious in giving money to projects, the Commons Public Accounts Committee said in a scathing report.
The MPs urged the government to "get a grip" and set stricter targets.
But Mike O'Connor, chairman of the UK Lottery Forum, said the £2.4bn was "already committed to other people".
'Not enough money'
It was wrong to say the funds were "sitting around doing nothing", he told BBC Radio 4's Today programme.
"As well as having spent all the money we have got, we have spent money we hope to get over the next year or two."
Mr O'Connor added: "There is always going to be more demand than supply. We will never be able to give a grant to everybody who applies, because there simply isn't enough money."
The government has welcomed the MPs' report, saying it is working with the distributors to "make more progress".
Proceeds from Lottery ticket sales - £15bn since its launch in November 1994 - are held in the National Lottery Distribution Fund until it is needed by the 15 distributors to make payments or meet their own costs.
In the report, the all-party committee said that, instead of money being quickly handed out to worthy causes, it was being held in case it was needed for unidentified projects in the future.
This was despite the fact that balances were constantly replenished.
Chairman Edward Leigh said Lottery money was for funding worthy projects and not for "sitting in a bank account doing nothing".
Had distributors not been "too timid", an extra £450m would have been committed by March 2004, he added.
A target to halve balances by 2004 had been missed by a "wide margin" with the balances of some distributors actually increasing, the report said.
Total balances fell by only 31% to £2.4bn in May 2005 from £3.6bn in March 2002.
The Heritage Lottery Fund and the New Opportunities Fund were responsible for holding more than £1.5bn - 64% of the total - in May.
The Department for Culture, Media and Sport (DCMS) must set "clear milestones" for reducing balances, while individual distributors must also set targets, the report urged.
It called for an increase in the money paid out in grants and the number of grants.
The committee acknowledged that planned Olympic lottery games were causing uncertainty among distributors about future funding.
But it noted that ministers had agreed to give two years' notice to distributors of any changes.
A DCMS spokesman agreed it was important that Lottery money got "to communities as quickly as possible".
Conservative culture spokesman Hugo Swire said government targets to reduce balances had "failed spectacularly".
"Labour's plans to take control of 50% of all Lottery funds will only make the problem worse and deny good causes across the country the funds they badly need," he added.