Poor planning and over-optimism contributed to financial problems at New College Lanarkshire, according to the Auditor General, Caroline Gardner.
The college was established in November 2013 by the merger of Cumbernauld College and Motherwell College, with Coatbridge College joining in April 2014.
New College Lanarkshire received a £1.9 million advance from the Scottish Funding Council (SFC) in July 2017 after suffering cash-flow problems.
The college attributed its issues to lower than expected fee income and higher than anticipated costs around national pay bargaining, pensions and national insurance.
Ms Gardner’s report says that the college’s cash issues stemmed from setting an ambitious tuition fee income target of £6.1 million but bringing in only £5.2 million and not planning effectively for £400,000-worth of staff pay increases that resulted from the reintroduction of national bargaining in the college sector.
New College Lanarkshire’s underlying deficit in 2016/17 was £560,000. A plan to reduce cost pressures - a condition of the SFC advance - has yet to be finalised.
In the meantime, the college has taken steps to improve its financial reporting and reduce its estate and IT costs.