The independent financial watchdog is to have new powers to scrutinise schools' budgets to ensure they are providing value for money.
Under new legislation more money will go directly to schools so they can take on work formerly carried out by local authorities.
Heads will be expected to open up their books to the Audit Commission to show they are using the extra cash appropriately. This will be in addition to the regular local authority audits schools already undergo.
Stephen Byers, school standards minister, said last week: "We all believe in the principle that it is right to delegate money down to individual schools. However, we do not yet have the right mechanism to ensure that we are achieving value for money."
The Government was discussing with the Audit Commission how it can evaluate schools' financial performance and give heads guidance on spending efficiently.
He said schools should not be "scared stiff" at the prospect of a commission check. "We should be trying to show individual schools that the commission's reports and recommendations can benefit them . . . so they can see the Audit Commission as a friend," said Mr Byers.
The commission plans to look at transferring the audit regime of grant-maintained schools to LEA schools. It already has powers to scrutinise local authorities and has done sample audits of schools. Under its new role, the monitoring would be more detailed, involve more schools and also check on how schools are spending money earmarked for government initiatives.
Greg Wilkinson, associate director of the commission, said: "Increased delegation will not be effective if schools are stashing away the extra money when they should be spending it on driving up standards."
David Hart, general secretary of the National Association of Head Teachers, said: "Heads who abide by financial regulations and good audit practices have nothing to fear. The commission's role is appropriate and welcome."
It is not yet clear how often schools could expect to see the auditors, nor how the new arrangement will cut across existing value-for-money checks carried out by the Office for Standards in Education. It is likely to exacerbate tension between the two organisations.
Adding up the Sums, a series of reports by the commission comparing schools' spending has shown scope for greater efficiency savings and revealed that the extra responsibilities may bring extra risks.
"The risk of extra delegation is not so much from fraud, it is from schools getting into a mess over budgeting and planning, especially with so-called "lumpy" items of expenditure, for example a new boiler or roof," said Mr Wilkinson.
Currently, budgets of schools can vary from #163;250,000 for a 200-pupil primary to more than #163;4 million for a large secondary. And there have been concerns, from different quarters, that schools are neither creative nor naturally entrepreneurial with the money.
Nigel de Gruchy, general secretary of the National Association of Schoolmasters Union of Women Teachers, said the Audit Commission's role would create even more paperwork and bureaucracy for teachers. "Instead of concentrating on teaching, heads and deputies will be chasing round trying to get the cheapest price for fixing the roof," he said.