The Welsh inspectorate blamed inadequate data collection and analysis of pupil performance for the "slowing down" of achievement levels in Wales.
In a report launched this week, The use of performance data in local authorities and schools, inspectors contended that most LA officers do not broach poor performance with schools or within departments.
Its recommendation - that LAs, as well as schools, make better use of data available to identify and challenge poor performance - comes as one in 10 schools are reported to be not doing as well as they should. The number in special measures or causing concern doubled last year.
Poorly performing LAs took some blame for "slipping standards", with one-third of services described as poor and two-thirds deemed unlikely to improve.
Inspectors found that LAs, as well as schools, do not make good use of data to help pupils at risk of underachievement.
But teaching unions voiced concerns that a testing and league table culture was returning in Wales "through the back door", with moves to compare performances of schools with better data.
Examples of good practice in data collection included one LA where National Foundation for Educational Research tests were given to all pupils in Years 1-7 in reading, maths and non-verbal reasoning.
Chief inspector Dr Bill Maxwell said: "Local authorities and schools need to understand where underperformance lies."