Commenting on the Auditor General's report, Roger McClure, chief executive of the Scottish Funding Council, said it provided "a helpful external view of the council's progress across a range of its key initiatives".
Mr McClure said: "It acknowledges the improvement in colleges' financial health, estates, quality of provision and the significant collaboration which now operates across the sector.
"These are achievements which reflect the council's and colleges' shared commitment to continuous improvement.
"The report rightly identifies scope for further progress in some areas, but this is always going to be the case as colleges are operating in a rapidly changing and challenging environment.
"However, we will continue to work in partnership with colleges, their boards of management and the Association of Scottish Colleges to identify and meet these challenges," added Mr McClure.