Police are investigating allegations of fraud at Adam Smith College, the FE institution announced this week.
Fife Constabulary began its inquiry after an investigation by government auditors into the use of European project funding at the college between 2007 and 2012.
The interim principal, Martin McGuire, said the government audit had indicated that the college would have to repay a substantial amount of the money it claimed during that period, although the exact figure was not yet known.
While the college had not yet seen the full report, its main findings had been passed on verbally. On that basis, the decision had been taken to "suspend those staff members who worked in the relevant areas as a precautionary measure, with immediate effect", he said.
Fife Constabulary confirmed to TESS that it had been asked by the Crown Office to carry out an initial investigation, but could not give further details as this was "at a very early stage".
The Scottish government's European structural funding division called in government auditors last year after public interest disclosures raised concerns over the use of EU funding at Adam Smith.
Ian Harrington, the then principal, was suspended in October amid these claims. Mr Harrington had taken over from Craig Thompson who took early retirement amid claims of senior management bullying.
"I am extremely sad that police have now come in to investigate," said David Torrance, the MSP who raised questions about governance at Adam Smith in Parliament almost a year ago. He had hoped the college could resolve the issues quickly to be able to focus on "the education of young people", he said.
Mr McGuire, who was appointed as interim principal in October and is also principal of Cumbernauld College, said he was "determined to address and resolve these issues as quickly as possible and to ensure that high-quality learning and teaching at the college continues to be a priority for staff".
A Scottish government spokesman said allegations made last October that European structural funds were being mismanaged at Adam Smith College had led to the instigation of an audit investigation, the findings of which had been shared with the Crown Office.
The Scottish government had robust measures in place to monitor the use of European structural funds and regularly checked that projects and grant claims complied with the regulations, the spokesman added.