Colleges have been told to follow strict procedures after officials said they uncovered "inconsistent and sometimes inappropriate" practices aimed at maximising success rates.
Ofsted inspectors raised concerns that colleges were using different methods of reporting student numbers to artificially raise their success rates, prompting a joint review with the Learning and Skills Council.
Geoff Russell, LSC chief executive, said it uncovered a series of issues, including the failure to record students not funded by the LSC and all students' learning aims, as well as late changes to course end dates.
He has set new rules for any remaining returns for last year's results and for this year, which will require all students to be recorded, prevent in- year changes to their funding status or completion date and tighten rules on student transfers. Colleges that do not conform face sanctions.
David Hughes, national projects' director at the funding body, said the LSC did not believe there had been inappropriate reporting on a large scale, but said the integrity of success rates was crucial.
He said: "Success rates are one of the factors in the funding system. We are probably talking about marginal cases, but if it made a 10 or 20 percentage point difference that would make a difference to funding.
"It's a serious business, it's not just a measure about quality - it's important enough to affect funding levels."