The criticism emerged from the second independent review of a local education authority in a report on Kirklees.
The team claims that huge differences in the amount of cash available for local authorities and the Office for Standards in Education to spend on school inspection could be hampering progress.
"More space is given to summative and external forms of inspection and evaluation than to those able to support school improvement at a local level," the team said. "This imbalance does not create the best conditions for supporting school improvement."
The first authority to submit itself to external investigation was Staffordshire, which was judged competent and, in many ways, better than competent.
Both inspection teams were led by Professor Maurice Kogan, from Brunel University, who has been highly critical of Chris Woodhead, the chief inspector.
Kirklees estimated it had lost about Pounds 500,000 when cash was removed from authorities to support the work of OFSTED - money that would otherwise have been spent in the LEA on inspection and support for its schools.
Its inspectorate has to sell services to OFSTED to secure income to help sustain its own service.
OFSTED is to follow up the inspection by Professor Kogan's four-strong team, which talked to 109 people or organisations and visited nine schools in Kirklees. Its list of topics to investigate is drawn from the analysis of inspection evidence that relates to weaknesses that have been identified in schools.
National curriculum assessment results for the authority at key stages 1, 2 and 3 are all below national averages, as are the percentages of pupils gaining top and all grades of GCSE.
In its report Professor Kogan's team said: "While it is necessary to establish whether the LEA has taken effective steps to help schools to remedy these weaknesses, the LEA must be given a reasonable period of time in which to act.
"Furthermore, the risk of using a weakness-generated list is that it results in an investigation which neglects the strengths of the LEA schools."
It said Kirklees had already identified areas for improvement - key stage 2, achievement by boys, the quality of teaching, professional development of teachers, information technology and religious education - most of which were consistent with the OFSTED analysis.
And the team said some action to help schools to remedy weaknesses and consolidate strengths had already been taken.
"The effect of these initiatives should soon be clear, at which point the LEA and others can assess their impact upon the standards of achievement and progress of pupils whose attainments on entry to school are relatively low." The team said OFSTED needed to look at standards of achievement with reference to the value added by schools, focusing on primaries and attendance in secondary schools.
It urged that it also looked at the quality of teaching - particularly at key stage 2 - curriculum planning in primaries and schools' monitoring and self-evaluation.
"It is easy for external reviewers to overlook the short time span in which the LEA has had to assimilate the radical changes of the 1988 Education Reform Act and the plethora of legislation and prescriptive guidance from the centre that has reached them since.
"The LEA has kept faith with legislation in doing everything possible to strengthen the schools' capacity to act as self-accountable and self-management institutions. At the same time it has secured consensus on far-sighted policies: all concerned with education in Kirklees recognise that securing higher standards remains a key priority."
Representatives of schools, plus other witnesses the team saw, were virtually unanimous in their positive views of the way in which Kirklees exercised its responsibilities and support to schools.
Of particular significance to schools was the LEA's openness, its willingness to listen and act pragmatically within the limits of its resources, the quality of its routine administrative and professional support and its "quite exceptional" help during times of crisis.
"A number of people stressed how relieved they were to be part of the LEA (rather than grant-maintained) when such incidents arose and such support was provided."
Just two schools have opted out in Kirklees, and the team said the LEA now had a more active role.
"To have done so in a climate of school self-government, opting out and reduced financial resources is testimony to the skill, professional wisdom and hard work of the LEA's officers," the team said.
But this, it added, had led to claims of ineffectiveness and to the LEA holding on to uneconomical sixth-forms and all special schools.
It warned of a resource time-bomb over special education funding, which is the one growth area in the education budget every year.
The team, which included Tony Elson, executive director of Kirklees, Linda Kettles of District Audit, Ian Shelton, formerly of Her Majesty's Inspectorate, and Kenneth Sutcliffe, Bradford's former acting education director, had concerns about school contact officers' workload.
Since 1991, an officer has been assigned to each school. In September, this was increased to two with a list of 19 tasks. The team said the officers' work needed to be reviewed to ensure that the range of tasks was feasible and training needs were assessed and met.
Overall the team presented a picture of a healthy authority. "The schools painted a picture of an LEA that had improved the quality of its leadership and support. Not only does it do most things well, but it does so in a manner that blends consultation and participation with administrative efficiency."
Anatomy of a metropolitan district
Kirklees is the seventh-largest metropolitan district in England outside London and contains the urban areas, smaller settlements and villages to the south and west of Huddersfield.
A substantial proportion of the population belongs to ethnic minorities - 11 per cent compared with 6 per cent in England and Wales - and more than 12,000 children come from homes where English is not a first language. Parts of Huddersfield, Dewsbury and Batley contain areas of extreme disadvantage.
School population: 63,582
Primary and nursery pupils: 39,060
Middle-school pupils: 2,379
Secondary-school pupils: 21,530
Special school pupils: 613
Children on free school meals: 14,160 (August 1995)
Children on clothing grants: 19,292(August 1995)
Level of delegation to schools: 88.9 per cent
Staffing ratio in primary schools: 1:22.44 (national ratio is 1:22.9)
Staffing ratio in secondary schools: 1:15.95 (national ratio is 1:16.5)
Percentage gaining 5 GCSE grades A-C: 38.4 (national average is 44.5)
Percentage gaining 5 GCSE grades A-G: 84.9 (national average is 86)