Frank Cogley, who has taken early retirement at 55, is the first casualty of the local authority inspection regime, run by the Office for Standards in Education.

The Department for Education and Employment is trawling for a chief education officer from another area to be caretaker until a permanent director is found.

According to Peter Boundes, Liverpool’s chief executive, approaches have been made and details will be announced in next few days. Mr Cogley, director for the past 10 years, left his offices more than a week ago.

Management consultants KPMG are due to report shortly to a joint group of DFEE officials and officers from Liverpool on the future of the education service. The report is expected to suggest parts of the service should be contracted out to the private sector.

It appears Mr Cogley’s departure was hastily arranged and he confirmed this week that he was still in discussion with his employers. Details of the terms of severance have yet to be agreed.

The inspection report was particularly critical of the city’s councillors for not funding their schools at the level of similar local authorities. It also criticised the state of school buildings and accused councillors of wasting resources by maintaining surplus places.

The Liverpool inspection was brought forward because of concerns about support for failing schools, literacy and surplus places. The report found effective support for literacy, but it noted that Liverpool has 13 failing schools and a further 12 judged to have serious weaknesses.

The inspection process has resulted in two other councils being told to be put services out to tender. However, in the London boroughs of Islington and Hackney, the directors of education were both recent appointments.

OFSTED has now inspected education provision in one in three councils in England, and there could be further casualties in the senior ranks of local authorities.