Belfast Metropolitan College (BMC) has made losses worth more than £17 million since it opened, it has been revealed.
Redundancy costs, difficulties in retaining full-time students in key areas and accounting changes linked to the new private finance Titanic Quarter campus compounded financial problems dating back to 2007, an audit office report said.
Comptroller and Auditor General Kieran Donnelly said: "The College Improvement Plan (CIP) highlighted that BMC had incurred year on year unplanned trading deficits.
"The reasons given included a strategy of growth despite falling student numbers; it had significantly over-recruited students and had committed to a number of large scale projects that had a direct impact on the financial stability of the College."
This is the auditor's third assessment of the financial challenges facing the college since it was formed in August 2007.
Mr Donnelly said the college made an operating deficit of £2.5 million during 2011/12 and the cumulative loss since its formation was £17.3 million.
The institution underwent an efficiency review and improvements were agreed in how it ran its finances, buildings, curriculum and staffing in 2010 aimed at restoring financial balance. Despite this the college continued to make losses (except for 2009/10 due to a pensions technicality). The operating deficit for 2011/12 includes exceptional costs linked to redundancy payments of £863,000. Employees were laid off due to cutbacks in further education which prompted union industrial action.
The plan had originally forecast that the college would make a surplus worth £2.3 million last year before exceptional costs, with the total growing to £4.5 million this year. The real figure for last year showed a deficit of £1.6 million before exceptional costs.
The audit office said: "The actual performance is behind the College Improvement Plan forecast due to a delay in finalising and agreeing the CIP, which meant that commencement of the restructuring programme was delayed from September 2010 to February 2011. This was further compounded by challenges in attracting and retaining full-time students in some key areas and a change in how the college accounts for its private finance initiative Titanic Quarter capital project, which added £1.8 million to the deficit incurred in 2011/12 and 300,000 in 2010/11."
Mr Donnelly said the college had told him action had been taken to address the challenges, with a restructuring programme substantially completed last year, a revised enrolment process for this year and the update of all forecasts to reflect the reviewed way PFI is accounted for. The college expects to reduce underlying deficits to an "acceptable level" by this July. The college is the largest of Northern Ireland's six further education institutions, with income of more than £63 million.