A senior MP has expressed concern about the finances of the quango responsible for training college staff.
Liberal Democrat education spokesman Don Foster wrote to Baroness Blackstone, the higher and further education minister, after it emerged that the Further Education Development Agency had imposed a moratorium on major new work amid fears of cuts.
Documents seen by The TES show Stephen Crowne, FEDA's chief executive, wrote to senior managers before Christmas ordering a moratorium on new contracts over pound;10,000 and warning of budget cuts.
He said: "FEDA's budgetary performance in the first three months of the year is a matter of very serious concern. Even more worrying is the very significant shortfall in event planning for the new year."
He went on: "This year we may need to consider significant cuts in expenditure. For next year the funding councils will look closely at actual outputs against planned, and to the extent that we underperform will cut our grant."
His warning came after an internal report showed the quango went pound;86,000 into the red - well over the planned pound;11,000 deficit -during the three months to October 31.
In his letter to Lady Blackstone, Mr Foster expressed concern about FEDA's plans to sell its Mendip training centre near Bristol, and the organisation's general financial health. He said: "If the information that is now clearly in the public domain is incorrect, it is vital for the future credibility of FEDA that it is officially contradicted. If, however, it is correct, then I am sure you will agree that urgent action is needed to rectify the situation."
In a statement a FEDA spokeswoman told The TES the organisation was financially robust and simply needed "mid-year adjustments". The statement said: "FEDA has a sound and satisfactory financial track record. We are restructuring for the long term to provide even better value for money from the sector."
Income figures seen by The TES show the organisation failed to hit its monthly financial targets for regional or residential courses between January and July last year. In many cases the shortfall amounts to tens or even hundreds of thousands of pounds each month. In March, for example, staff planned that regional work would bring in more than pound;200,000. In fact income was only pound;14,312. In April, planned income was pound;73,635. Actual income was just pound;298.
A confidential management report pointed to a pound;50,000 overspend on education staff, pound;30,000 on administration staff and pound;20, 000 on subcontracted research work. In addition FEDA's work on widening participation is said to be pound;50,000 over budget.
The news comes in the wake of plans to move out of the old Further Education Staff College and establish a new FEDA headquarters in central London. Confidential documents show the plan would leave FEDA with a funding shortfall of up to pound;2.3 million. Figures put to the agency's board last year show the new London operation would increase costs by around pound;1.17 million a year.
The FEDA statement said it was "rationalising accommodation and staffing to address the long term needs of the sector in the future. This is in no way related to the current financial year."