Plans by Chancellor Gordon Brown, announced in last week's Budget, would mean the ALI becomes part of Ofsted - bringing an end to the two-pronged inspection of colleges by both organisations. The ALI is responsible for post-19 education at colleges, private training firms and in the workplace.
Mr Brown said: "The Government will consult with employers on the future of the Adult Learning Inspectorate, with the expectation that, by 2008, it will also be part of this single inspectorate for education, children's services and skills."
During its recent inspection of the army, the ALI interviewed more than 4,700 trainees and 2,000 staff, as well as listening to the families of recruits.
The inspection followed the suspicious deaths of young soldiers at Deepcut barracks in Surrey, where there had been allegations of bullying.
Chief executive David Sherlock said: "We found much good practice. The solution to most of the problems we saw had already been found somewhere within the armed services, but it was rarely used to inform or improve practice elsewhere.
"Where lessons had been learnt, most notably after Deepcut, few mechanisms were in place to ensure that other establishments addressed similar areas of weakness.
"A more professional approach is needed. This is, in essence, a multi-million-pound business which needs to be better managed, better organised and better controlled."
The ALI will continue working with the armed forces during the next year, focusing on officer training.
It says it is also concerned about the army's suicide rate, which outstrips the other services.
Mr Brown also announced an extra pound;350 million in the college capital budget, which can be spent on new buildings. The money would be available from 2008-9.
The 150,000 16 to 17-year-olds who are in jobs but not in training could be offered "negotiated learning agreements" with their employers.
This scheme will be tested, with pound;80m spent over two years, in eight areas of the country from 2006. It will try out a range of financial initiatives designed to encourage employers to give teenagers time off for studying or offer apprenticeship placements.
A further pound;20m will be spent over the next two years to encourage work-related education for 14 to 16-year-olds.
New centres of vocational excellence will be announced in five cities with large ethnic-minority populations.