The Local Government Management Board is intended to act as a corruption watchdog, but more importantly will offer advice and spread good practice to education authorities.
A local government source said: "There is some feeling that councils are drinking in the last-chance saloon, with the Government saying local authorities do not have a God-given right to run education and that services can be taken over by different organisations. "
The board's aim is to show that local government can keep its house in order by looking out for early warning signs - for example, a poor report from the district auditor. It will also investigate claims of freemasonry.
The board will be split into two - one section dealing with industrial relations and the other with training and scrutiny.
The aim will be to head off incidents such as "Donnygate" when widespread fraud and abuse of public money was discovered among councillors at Doncaster Council.
Graham Lane, Labour education chair of the Local Government Association, said: "We don't want all councils to be tarred with the brush of Donnygate or the Hackneys of this world.
"The education committee is considering setting up its own scrutiny committee which could include, for example, a representative from the Confederation of British Industry and the Audit Commission. It will look at inspection reports on councils and the best way to react to them and the new practices in education action zones."
Mr Lane has arranged to meet officers at Manchester Council which recently received a critical report from the Office for Standards in Education.
The new board will also play a role in training councillors. "We have to look at putting into place procedures that will stop sleaze and promote open government," said Mr Lane.
"The new training and scrutiny organisation may eventually come to be known as the standards committee."
l Stephen Byers, the school standards minister, has agreed to meet local government officers and officials in September to discuss an appeal from the teachers' employers organisation to have a full-scale inquiry into teachers pay and conditions.