More than half of schools given money to support poor pupils say it is having little or no impact on the way they provide for disadvantaged students.
Ofsted chief Sir Michael Wilshaw said it was a "real worry" if cash set aside in a government scheme was being diverted for "tarmacking playgrounds".
But schools minister David Laws said an "accountability mechanism" would help schools in England target the money.
The pupil premium is a key coalition policy, initiated by the Lib Dems.
- The pupil premium was introduced in April 2011 for pupils in England from low-income families
- In 2011-12 it was set at £488 per pupil - £625m in total and in 2012/13 it rose to £600 - £1.25bn in total
- The premium is available for children eligible for free school meals and pupils in care
- It has been extended from 2012-13 to pupils who have been eligible for free school meals at any point in the past six years
- Schools are free to spend the extra funding as they see fit but from September 2012, the government requires schools to publish information about how they use it
- There is also a service premium for children whose parents serve in the armed forces; this was £200 in 2011-12 and rose to £250 for 2012-13
Under the scheme, schools in disadvantaged areas in England are allotted £600 per head to help give extra support to poorer children.
The Ofsted report, which surveyed and inspected nearly 300 schools, found that half the schools thought the pupil premium was having a positive impact on raising achievement, but few could provide evidence to back this up.
Speaking on BBC Radio 4's Today programme, Sir Michael said: "We found that over 50% said that it was having either little or no impact on the way they organise and manage their schools in relation to the use of money on poor children.
"We find that surprising - this is a large chunk of public money."
Mr Laws said the government would not wish to "micro-manage" schools.
But he added: "Critically, while we're giving those schools freedom to use the money as they think best, we are also putting in place an accountability mechanism which will ensure that they use the money in the right way."
He said this meant that during visits to schools, Ofsted inspectors would "look at whether the schools are closing the gap between advantaged and disadvantaged pupils".
Then inspectors would "look at the ways they are using the money" and be "critical" where this was not effective.
The report comes as other Liberal Democrat policies come under scrutiny, with leader Nick Clegg and Lib Dem Business Secretary Vince Cable apologising for breaking their party's pledge to oppose increasing student tuition fees.
20 Sep, 2012
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Source: http://www.bbc.co.uk/news/education-19649306#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
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