Architects of the troubled high-tech system which monitors the work of all college students have been told to go back to the drawing board.
Experts called in to investigate problems with computers recording student returns from colleges say software should be redeveloped.
Consultants David Mason Associates criticised the Further Education Funding Council and colleges for problems introducing the individual student record (ISR) system and made 33 recommendations for improvement.
But the report said the system, which was used to compile the recent college performance indicators, had fulfilled its aims.
They said: "This is a very substantial achievement. It is to the very great credit of all those involved that the objectives have largely been achieved. "
Colleges said the system was now running well, and appealed for a period of consolidation before changes were made.
The scheme was introduced in 1994 to log every student's progress and use colleges' electronic returns to calculate funding. But the consultants criticised the decision to link gathering information with calculating college budgets and they said many colleges failed to appreciate the accuracy of information required by the system.
Computer software was sometimes "unbelievably slow". Different systems gave different results, causing great difficulties for staff.
There were also difficulties in transferring college data to the FEFC, and consultants warned the funding council could have difficulty dealing with the mass of work which would be created if colleges submitted their returns on time.
Much of the software had considerably improved, the report says, but "we believe that the council should seek to redesign and implement new improved systems using recognised good practice in the software industry.
"Should a decision be taken to proceed early enough it should be possible to have a pilot replacement for the 1997-98 academic year, which could then be released fully within colleges by the millennium."
A spokeswoman for the FEFC said the council had already responded to many recommendations and was improving its system.
FEFC chief executive David Melville said: "The ISR has created the first ever comprehensive information about further education students and is proving a central tool in understanding the college sector and the contribution it is making."
John Brennan, Association of Colleges policy director, said the system was now working well in many colleges, although there were still problems. He added: "Most people have coped with the teething problems, although clearly there are still institutions with problems. A lot of progress has been made, and it's a question of letting things settle down."
John Rockett, principal of Rotherham College of Arts and Technology, and a member of the FEFC statistics steering group, said the basic information system worked without major problem, but few colleges had fully exploited the opportunities it presented.
He said: "There is tons of marketing information, cost benefit information and value-added information there, there's just no integrated software which allows colleges to get at it in detail."