SUSPENDED: Ian Harrington was only appointed to the post in March this year.
Ian Harrington, who has only been in the role since March, was suspended by Adam Smith College in Kirkcaldy, Fife.
He took over after suspended head Dr Craig Thomson decided to "resign and retire" after claims of bullying and harassment.
Local MSP David Torrance has called for a probe into alleged failures in governance.
He said several members of staff have been suspended, and Mr Harrington's suspension would allow a full disciplinary investigation to take place.
However, it is unclear at this stage which members of staff such a probe would involve.
The suspension comes after Mr Torrance raised fears with Education Secretary Michael Russell and the Scottish Funding Council launched an investigation.
It was earlier reported three senior members of staff including Mr Thomson's wife Linda were away from their desks after the funding council probe began.
Mr Torrance said: "The suspension of the interim principal to allow a full disciplinary investigation, the resignation of the previous principal and the suspension of several senior members of staff demonstrates the management at the time was not fit for purpose and was not acting in the best interest of the staff and students."
Martin McGuire, currently principal at Cumbernauld College, has agreed to take the position as acting principal.
Irene Morrison, chairwoman of the college board, said: "In response to concerns raised, the board has suspended the interim principal, Ian Harrington, to allow a full disciplinary investigation to be carried out.
"The suspension of a staff member in these circumstances is consistent with the college policy on such matters and does not pre-judge the outcome of a disciplinary investigation.
"The board is determined to address and resolve all of the issues that have been identified. It has shared these concerns with the Scottish Funding Council and the Scottish Government and is now working urgently to address the matters raised.
"During this time it is vital our staff are supported in order to continue to deliver a high quality learning and teaching to students and work with our partners towards a new Fife College.
"To ensure these key priorities are achieved, the board considers the immediate appointment of an acting principal to be an essential measure."
The amounts are not known, and it is unclear which projects are affected, but the college's latest accounts reveal it receives European funds annually.
In March Finance Secretary John Swinney revealed it was in line for part of £10m of funding to support and train firms developing green technology, partly made up of European Regional Development Fund cash.
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