Hundreds of millions of pounds earmarked for college buildings but never spent could be absorbed by areas other than further education following next month's spending review, the Government has confirmed.
The former Learning and Skills Council (LSC) held back about pound;200 million of the total pound;2.7 billion budgeted for Building Colleges for the Future (BCF) over fears that it could be liable for compensation claims from institutions whose building plans were scrapped last year.
But with a judicial review finding in the further education funding body's favour - although an appeal could still be launched - the Department for Business, Innovation and Skills (BIS) said the money could be spent elsewhere or cut.
A spokeswoman for the Skills Funding Agency, the LSC's successor body, said: "The capital funds we have for this year are all committed and the pound;200 million was always, and still is, subject to the comprehensive spending review decisions by the new coalition Government."
Julian Gravatt, assistant chief executive of the Association of Colleges (AoC), said there was always a risk that the fund might be reduced in the spending review, but urged the Government to continue the investment.
"The Government is getting good value for money from the schemes that are funded," he said. "The bids which were turned down would also offer good value for money. We hope that this will help persuade the Treasury and BIS to provide money for new projects in the spending review and AoC will be taking this up in the coming weeks."
Last week, officials announced that 149 colleges would benefit from a share of pound;50 million in grants of up to pound;225,000, or pound;1 million in exceptional cases.
Business secretary Vince Cable said: "Improving people's skills is a key part of this Government's plans to secure economic growth, and colleges are right in the front line of this challenge.
"Helping colleges modernise their facilities will give them a much-needed boost at a time when education could not be more important."
The colleges were selected because they had not previously received more than pound;5 million of public funding for new buildings and their projects could be completed by September next year. They were also judged on the condition of current buildings, the benefit to students and the potential for local regeneration.
Waltham Forest College is one of 15 to be awarded the maximum grant, after its plans for an pound;86 million rebuild collapsed.
"We did go through a period of grieving over that," Robin Jones, the principal, said. "But we have consigned that to history now. We see this new project as a building block for other development as funds become available."
The college will spend pound;3.3 million updating its reception area and main hall, relocating its inclusion centre and removing temporary classrooms installed in the 1970s.