The way in which local authorities fund schools is set to be overhauled as part of the independent review of education spending, TES Cymru understands.
The review will focus on the "inefficient" way Wales' 22 councils administer their education budgets, according to sources close to the process.
It is expected to recommend that LAs pool their education resources at regional level much like the country's seven reorganised local health boards.
But Leighton Andrews, the education minister, has also raised the prospect of schools being directly funded by the Assembly government, bypassing local authorities entirely.
The first stage of the review, using information already held by the Government, is currently being carried out by auditors PricewaterhouseCoopers.
They are due to report back to the minister by the end of the month on how education investment can be refocused to the front line - schools, colleges and universities.
Under the terms of reference for the review, which were made public last week, the Government wants the auditors to identify the real costs of administering education in Wales, as well as opportunities to share services and cut bureaucracy.
This has been interpreted by many as a swipe at LAs, which have come under fire in recent years for the amount of money they hold back from schools.
Last year, councils planned to delegate just 75.7 per cent of their education budgets - down from 81 per cent in 2002-03. The rest of the cash - a record pound;579.3 million - was held centrally.
Giving evidence to the finance committee on post-16 funding last week, Mr Andrews hinted that the review could address these concerns.
"If we are looking at the cost of administering education in Wales, then we are going to be looking at how money gets from the Assembly government to the end-user," he said.
"As school funding goes through local government, that will inevitably be looked at. They will need to look at how funding is distributed and whether different funding models should be looked at.
"We could fund schools directly. That's something that may well be discussed in the context of the independent review."
But Dr Chris Llewellyn, the Welsh Local Government Association's director of lifelong learning, said councils are best placed to decide on how to fund their schools. "Local authorities can take into account local circumstances," he said.
"There is an element of misunderstanding and a lack of a general awareness of what that money is spent on - things like transport, meals, special needs, learner support. (There is) a whole range of statutory functions."
Dr Llewellyn said attacking local authorities was not the answer to refocusing investment.
"We will have to see what emerges from the review, but it makes more sense for the authority to arrange the provision for all schools rather than schools doing it on their own," he said.
Record pound;527 funding gap sparks report
The education spending review was prompted by the growing per-pupil funding gap between Wales and England, which has reached a record high of pound;527.
During his leadership campaign, Carwyn Jones, the new First Minister, pledged to reduce the gap by increasing education spending by 1 per cent above the block grant from Westminster from 2011.
In January, education minister Leighton Andrews announced a major review of the cost of administering education in Wales.
Launching the review, Mr Andrews said: "We put money into the education system not to sit in county halls but to be spent in schools, colleges and universities."