Southend Council has vowed to launch an investigation into the amount of cash schools are holding back.
Officials are to look into balances being held at schools to make sure they are spending as much money as possible directly on pupils.
In total, schools across the town are hoarding more than £5 million by carrying across funding from last year's budget to this year's.
Education director Stephen Hay told the cabinet the issue was the "only fly in the ointment" as members welcomed plans to pump £6.5 million into education this year.
Mr Hay said: "Schools can carry forward money from one year to the next quite lawfully."
Figures show several schools keeping back large sums of money. Mr Hay said most, such as Cecil Jones which put away £855,000 from last year's budget instead of spending it, were using the cash for large-scale building programmes.
The cabinet backed budget proposals to increase school budgets by 4.1 per cent in the next financial year.
By Chris Weeks
Reporter's e-mail: chris.weeks@notes.newsquest.co.uk
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