Education chiefs in Middlesbrough have fired a warning to schools after it was revealed some were sitting on cash reserves of nearly pounds 2m.
They have been warned if they do not earmark the money it will be "clawed back" and distributed to schools that need it.
The warning follows Government advice to local authorities to challenge schools with huge cash reserves.
A report to be discussed at a meeting of Middlesbrough Council's executive today has revealed the end-of-year balances at its 52 schools has rocketed from pounds 2.6m to pounds 4.7m in the past five years.
When the council surveyed a group of schools which had pounds 3.2m in reserves between them, they found that pounds 1.7m was not earmarked in any way.
From next year, schools with large cash reserves and no plans to use them could be challenged by the Middlesbrough education authority, with a view to clawing it back and redistributing it.
Redcar and Cleveland Council is already clawing back unplanned balances from schools.
Stockton has revealed its schools have cash reserves totalling pounds 6m but the money is earmarked.
The Department for Education and Skills has said education authorities should challenge schools when cash reserves not earmarked for improvements reach a certain percentage of their budget - 5pc for secondary schools and 8pc for primary and special schools.
Councillor Paul Thompson said: "No-one would object to a school keeping money in the bank if they know they have a big building project coming up, or have to deal with a falling school roll.
"But where a school has a disproportionate amount of its money in reserve - and no plans to use it - we have a duty to look into the matter.
"If a school can't spend the money allocated to it, then the fair and sensible thing is for that money to go to a school that can."
Ann Baxter, director of children, education and social care for Stockton, said: "Last year schools across the borough held reserves of around pounds 6m in total. Much of these resources are reserved for planned projects, and we are working with them to ensure the money is spent to benefit the children and young people in Stockton."
Redcar and Cleveland Cabinet member Steve Kay said the council "changed its funding framework in April 2005 to allow for the claw back of excessive, unplanned balances."