Edinburgh's Telford College has been commended by HMIE for its high- quality teaching and sector-leading work in computer programming, computer games development and hospitality - achieved despite having suffered a 10.4 per cent cut to its budget.
The inspectorate's report, published this month, also praised the energetic leadership of Telford's new principal, Miles Dibsdall, who has controversially stripped out the college's senior management team, including the post of deputy principal.
He told TESS the institution was "dysfunctional" when he arrived 13 months ago and that his overhaul of the senior management team, which has led to efficiency savings, had taken place before government funding cuts were imposed.
Since then, budget reductions of pound;2.4 million had forced Telford to take action similar to other colleges, including voluntary redundancies and streamlined course provision.
But Mr Dibsdall said the changes introduced through Telford's "journey of discovery" over the past year were responsible for its success.
"We have been writing the new agenda and the key is to be proactive and to be part of this exciting new environment we are going to be in," he said.
He also maintained that he had been right to turn down the chance to merge Telford with the two other Edinburgh colleges - Jewel and Esk, and Stevenson - because being part of a larger powerhouse institution would have compromised his ability to introduce such radical changes.
In addition to its internal restructuring, Telford has begun a review of its course provision. This could mean discontinuing some courses, but also introducing some never taught at the college before, such as forensic sciences, said Mr Dibsdall. His aim was to align the college's provision more closely with employers' needs.
In future, courses will be structured into five learning hubs of related subjects, where students can progress up a "skills ladder". Each hub is to be sustainable and will be supported by an employers' council, which will validate the training.
As part of Telford's revised arrangements for evaluating its teaching, the college has developed the "critical friend exchange" - a voluntary, peer lesson observation process which encourages lecturers to reflect on their practice.
The college is also looking into sponsorship and commercialising its activities.
Learners have become an integral part of the quality improvement process, with 35 student course representatives holding monthly meetings with Mr Dibsdall, he said.
The quality improvement unit is also conducting regular focus group sessions with students.
Staff had embraced the changes and had voted against the proposed merger with Jewel and Esk and Stevenson colleges earlier this year so they could continue to pursue the individual journey the college had started, he added.