Half of all further education colleges in England are forecasting an operating deficit for this year, according to figures to be announced by the Further Education Funding Council on Monday.
The council will present the statistics in its report to the annual general meeting on Monday. Overall, the report says, the sector is in weak financial health due to the accumulated losses of the first four years since colleges gained their independence from local education authorities.
Colleges must generate surpluses to restore their financial health and set aside funds for investment, says the council. "While the financial health of the sector has improved, 215 colleges, almost half the sector, were still forecasting an operating deficit."
David Melville, FEFC chief executive, told The TES: "We have strengthened our approach to guidance and support for colleges in financial difficulties. With the Secretary of State's promise of new money for lifelong learning, the financial future of the sector looks much brighter."
But there is still concern at the highest Government levels that the weak financial situation of colleges has hardly changed for the past two years.
In 1997-98, 94 colleges, (21 per cent) fell into the "most vulnerable" category, similar to the previous year. In 1994, only 25 colleges fell into this category. Six institutions had received extra funds because of their exceptional circumstances.
"The council has given detailed advice to the Secretary of State on the financial needs of the sector and the pressures upon it," says the report.
The FEFCannual meeting is likely to be questioned on the increasing use of part-time staff and evidence that they under-perform compared with full-time lecturers.
About 75 per cent of lecturers are full-time and the rest part-time, but Jim Donaldson, the FEFC chief inspector said this week, that the increase in part-timers and agency staff was "an unassailable fact".
He added: "When we visited lessons and compared student grades we found that on average the quality of full-time teachers was slightly better than those of their part-time colleagues."
This issue was one raised by the House of Commons education and employment select committee earlier in the year and the council said it would investigate further.
One problem was that part-time staff did not get the same support as their full-time colleagues, said Mr Donaldson. They made a significant and valuable contribution to the work of the sector.
He added that some colleges had returns which showed "very heavy failure rates" for some GCSE courses and therefore more attention was being paid to alternative programmes, such as GNVQs. Many of these students were people who had failed GCSE at school and then gone on to college. "The college should think carefully about the courses they offer to these students," he said.
He picked out sixth-form colleges for praise. "In terms of value-added they perform as well as independent schools or grammar schools. It is very difficult to establish new sixth-form colleges. On their track record there should be a strong case for sixth-form colleges."
Mr Donaldson said a persistent problem was the long tail of poor or under-achievers. "In the bottom 10 per cent of colleges, fewer than half the students achieve the qualifications for which they are aiming. They complete the course but fail to achieve the qualification.
"That is why we are setting colleges benchmarks, establishing target-setting and creating incentives to support improvements they make."
He said that some colleges did well in recruiting, and achieving success, with students in areas of multiple deprivation. Others did less well. That was the reason for establishing benchmarks.