A report by Audit Scotland found colleges face an 11% reduction in public funding by 2014/15 - amounting to £62 million - with reducing staff numbers "likely to continue to be colleges' main way of delivering savings".
The report went on to warn that cutting staff numbers risked the removal of the skills and experience required to maintain the quality of learning.
Government funding cuts between 2011 and 2012 have already removed £56m from the sector, with the loss of 800 full-time equivalent staff - most of them lecturers.
At the same time, Michael Russell, the Scottish Education Secretary, has forced through a radical programme of mergers along regional lines that will result in college numbers falling from 42 to an eventual 21.
Caroline Gardner, the Auditor General for Scotland, said: "Income has fallen significantly and this will continue for the foreseeable future. Colleges will have to manage these funding reductions and changes in structure and status while meeting local communities' demands for further education."
Auditors went on to highlight the significant decrease in the number of learners at college as a result of Scottish Government moves to prioritise longer courses for younger students, which has undergone a decline from 308,000 to 206,000.
The report said: "While colleges continue to meet annual targets for learning activity, a greater emphasis on full-time education and prioritising places for younger students may limit learning opportunities for older people."
Overall, Audit Scotland concluded that college finances were "generally sound" although future public funding constraints meant colleges would continue to face financial challenges.
Last night, Larry Flanagan, general secretary of the Educational Institute of Scotland (EIS) teaching union, which represents many lecturers, said the report highlighted the very difficult circumstances facing colleges.
He said: "The significant decline in teaching staff numbers, student places and courses illustrate the damaging impact of these funding cuts on provision. While the regionalisation programme under way does offer positives, it should not be misused as a cover for delivering ever deeper cuts."
Gordon Maloney, president of student body NUS Scotland, said the report raised "real concerns" over the cuts faced by colleges.
There was also an attack from political opponents with Liam McArthur, education spokesman for the Scottish Liberal Democrats, saying the report laid bare the impact of SNP cuts on Scotland's colleges.
Scottish Labour's education spokeswoman Kezia Dugdale added: "This report shows the true story behind the SNP's relentless attack on colleges. There are less people going to college, more on waiting lists, fewer teaching staff and part-time courses have been slashed."
However, John Henderson, chief executive of Colleges Scotland, which represents college principals, said there was no evidence the experience of students had suffered as a result of staffing reductions.
And a Scottish Government spokesman said the report highlighted the strength of the college sector with reserves rising to a record £214m. He said: "Audit Scotland recognises that colleges have responded to the Government's request to shift focus to courses that improve people's chances of getting and staying in work."
The Audit Scotland report is based on the audited accounts of colleges for 2011/12, the most recently completed college financial year.
The report also reiterated warnings that the ability of colleges to build up reserves of private cash could be threatened under Westminster legislation that makes them full public bodies.