The Department of Education is sending in four commissioners to take over the duties of the South Eastern Education and Library Board.
There was a major protest at the board meeting
It confirmed the board had failed to meet its deadline to cut costs.
The decisions made at Thursday's board meeting will not stand because it was adjourned over legal wranglings.
It means a vote on the cuts to special needs education passed earlier at the meeting has now been overturned, the department said.
The board met under threat of legal action by the government.
It had been given until 1800 GMT to implement cost-cutting measures which will affect special needs pupils.
The government had warned board members that it was their last chance to make the difficult decisions which would keep them financially solvent.
Some board members had previously vowed to never pass measures which would damage children's education.
For several months, South Eastern Board employees have been trying to get agreement from board members on a package of cost-cutting measures which will affect pupils with special needs.
Last month, board members voted not to put through the multi-million pound cost-cutting measures because they wanted more time to consult with teachers.
The measures include cutbacks in special units and in the number of classroom assistants. Some would take effect as early as September.
The board wanted more time to consult with special needs teachers
The permanent secretary of the Department of Education had warned that if the deadline was not met, court action could follow and legal costs would have to be paid by the board.
Trade unions have protested about the proposed cutbacks, while some council members remain opposed to the changes.
Education Minister Maria Eagle said the board was "currently in the process of repaying money that it spent without authorisation during 2003-05".
"This is money that was denied to children and education services in the rest of Northern Ireland during that period, and it is essential it is repaid as soon as possible," she said.
"The SEELB must get its budget under control for 2006/07, so that other parts of the education budget do not have to cover its spending once again."