A SCOTTISH college is facing a financial crisis after slipping more than £3 million into the red.
Audit Scotland said Edinburgh College would face "extreme financial difficulties" unless it was given extra financial support to address the £3.3m shortfall.
The college has already unveiled cuts to courses and potential staff redundancies because of an existing deficit of £600,000 and the situation is now significantly worse.
The report by auditors also highlighted serious concerns over the governance of colleges in Glasgow, with the city's overarching regional board still not capable of managing the region's finances and Glasgow Clyde College running up a bill of hundreds of thousands of pounds on lawyers' fees.
The damaging report will also throw the spotlight on the effectiveness of the Scottish Government's programme of further education mergers which have been criticised for being delivered too quickly and without sufficient funding or oversight.
The crisis at Edinburgh College has arisen after it failed to recruit sufficient students to meet its targets and saw a resulting drop of six per cent in its funding.
In addition, the college was told it could no longer boost the cash its receives from the Scottish Funding Council (SFC) by putting on extra courses for existing students.
The report from Audit Scotland said: "The college has failed to meet its targets for learning activity in each year since its establishment, although the levels of under-delivery have been small - in the region of one to two per cent in each year."
A subsequent review led to the college, which receives £68m in public funding, agreeing with the SFC to reduce its activity target by around six per cent which had placed the college under "significant financial pressure", Audit Scotland said.
A spokesman for the SFC said: “We are currently working with the college on a business transformation plan to put it to a sound financial footing for the future. This includes work to match courses to long-term supply and demand and regional demographics.
"To help alleviate short-term financial pressures we have allowed the college to retain £0.8m of funding in academic year 2015/16 for learning and teaching activities which had not been delivered in the previous year."
Edinburgh College principal Annette Bruton said: “The report recognises the need for additional funding and we agree this is important for the college to develop and meet the needs of students and the region as effectively as possible.”
Liam McArthur, education spokesman for the Scottish Liberal Democrats, blamed the issue on the Scottish Government's merger programme.
He said: "Two years after the SNP's merger process we have a situation where colleges are short of crucial funding, have experienced significant problems of governance and new regional boards are failing to fulfil their basic responsibilities."
A Scottish Government spokesman said: "The Education Secretary's decisive action to remove board members has been vindicated by the Auditor General's report on Glasgow Clyde College and today's report on Clyde confirms a new board has taken action to return the college to good governance.
"The Auditor General has also reported progress by the Glasgow Colleges' Regional Board towards full operations and we understand Edinburgh College has identified further action to address its financial difficulties and the SFC is continuing to provide the college with support."
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