But the figure, though damning, is an improvement on the previous year, when one in five colleges was described as failing.
Inspectors said FE in colleges is "afflicted by persistent weaknesses" and that half of all colleges had some unsatisfactory provision.
They singled out work-based learning for particular criticism, describing it as "a weak element of FE" and said provision is unsatisfactory in two-fifths of colleges.
Inspectors expressed concern that "many work-based learners make progress in the specialist elements of their programmes, but fail to achieve key skills qualifications".
They also said that the most vulnerable learners are the worst-served in FE. Literacy and numeracy teaching is often unsatisfactory, as is the quality of provision in independent specialist colleges.
"Too many young people in young offender institutions and secure units fail to receive an education that meets their needs or prepares them for the transition to the community," it added.
Fewer colleges had unsatisfactory leadership and management, but one in 10 colleges still failed to make the grade. The proportion of colleges where leadership and management are good or better remains at about two-fifths.
However, the inspectors did say: "Institutions are usually at least adequately managed and provide generally effective teaching." The report added: "There is still too much unsatisfactory teaching, mainly in general further education colleges. In particular, the teaching of literacy and numeracy is too often inadequate."
Despite the stringent criticisms, the Association of Colleges took heart that the number of inadequate colleges has been halved in one year to 9 per cent.
"We think colleges do a very impressive job for a great many people, many of whom have not succeeded in the schools system," said Judith Norrington, Association of Colleges director of curriculum and quality.
"The sector can always do better, but we should look at the value that has been added to many people's lives by their further education, and we should celebrate their success."
Ofsted and the Adult Learning Inspectorate inspected 86 general further education, tertiary and specialist colleges and 19 sixth- form colleges in 2002-03. The proportion of sixth-form colleges inspected was smaller than in the previous year.
The inspectors found that most provision in colleges was at least satisfactory, and there was much more good or very good practice than there was unsatisfactory.
The report added: "However, further education in colleges is afflicted by some persistent weaknesses. Half of all colleges have some unsatisfactory provision, but often this provision affects a minority, sometimes a small minority, of learners.
"Also, the incidence of unsatisfactory provision in 2002-03 is lower than in the previous year. There is less unsatisfactory teaching and, significantly, fewer colleges have unsatisfactory leadership and management. There are, however, as yet, no convincing signs of significant overall improvement in the college sector. Across the colleges inspected in 2002-03, there is less unsatisfactory provision than in the previous year, but there is also less that is outstanding or good.
"In part this is because fewer sixth-form colleges were inspected in 2002-03. There is a marked difference in quality between general FE colleges and sixth-form colleges. Sixth-form colleges continue to be consistently successful providers of 16-19 education."
The inspectorate said there were many good reasons for this, as general FE colleges cater for different ranges of students and are often complex in the make-up of their student body, staffing structure and their locations.
The report described the most common failing of college management as "the performance of its core function of ensuring and sustaining the quality of teaching and learning".
Ofsted's key points
* Further education colleges are having some success in attracting people from groups not traditionally engaged in education.
* Poor attendance continues to damage students' learning in general FE and sixth-form colleges.
* Completion rates on modern apprenticeship courses are stilltoo low.
* Two-thirds of people who begin foundation apprenticeships in retailing, care-giving, hairdressing and hospitality are not achieving qualifications in the key skills.
* Courses in visual and performing arts and English, language and communication remain the strongest.
* Courses in construction, engineering and information and communications technology are relatively weak.