Councils in England could save £312m annually on adult social care if they carried out client assessments more effectively, the Audit Commission says.
The public spending watchdog said some councils conducted reviews at the same quality as others but more cheaply.
The commission said any chance for councils to save money in this area should be "pursued enthusiastically".
Councils said efficiency savings could not offset a shortfall of billions of pounds in care budgets.
Every council in England is responsible for helping with the care of the elderly, the seriously ill and the disabled.
But the cost of assessing these people, to find out what level of assistance is needed, varies widely.
In 2010/11, English councils did about 1.8m assessments of people's needs and reviews of the resulting care, at a cost of £2.2bn - 12% of gross spending on adult social care, the commission said.
Audit Commission managing director Andy McKeon said: "Assessments and reviews are a crucial element of social care, enabling individuals' needs to be properly identified and met.
"However, our evidence suggests that councils can spend less and still do an excellent job in helping people receive the care that they need.
"As councils struggle to meet the needs of a growing older population with less cash, any opportunity to save money and redirect it into care should be pursued enthusiastically."
In its report, the commission found that some councils spent about half the amount of other councils on each assessment and review.
This was done, the commission said, while undertaking a similar volume of work and achieving the same standards of quality.
It said the potential savings could fund the annual home care of 20,000 older people.
Many councils would be able to make significant savings by identifying and eliminating the causes of differences in costs, it added.
The Local Government Association said councils were always working hard to offer the best value for money.
But it said local authorities faced a massive cash shortfall because of reduced government funding and an increasing elderly population.