The education watchdog has warned schools receiving the "pupil premium" they will have to demonstrate how the funds are making a difference to children from poor backgrounds.
Sir Michael Wilshaw, Ofsted's Chief Inspector, said finding ways to spend money on the most disadvantaged pupils was not "rocket science".
His comments follow a survey which found that fifty per cent of schools said the £1.25bn fund was making no difference.
"The big issue is that this money is for our poorest children to ensure that they achieve as well as others who come from more privileged backgrounds," he said.
"It is simply not good enough for heads of schools to say that it is not changing policy.
"If this money is going to the main school budget and children from poor backgrounds are doing well, we do not have an issue with that and I'm sure that government won't, that is not a problem as long as they can demonstrate that is happening.
"It will be an issue if it just falls into the main school budget and a school can't show that it is improving the outcomes for poor children.
"We will be very critical of those schools that are not thinking long and hard about the use of the pupil premium."
He added: "This is not rocket science stuff. There is a wealth of good practice out there in terms of how you raise achievement and how you raise achievement particularly of youngsters from poor backgrounds."