Nearly 30 governors at Derby Tertiary College, Wilmorton, and St Philip’s VI Form College, Birmingham, are almost certain to be removed by Education Secretary Gillian Shephard following damning reports of mismanagement published yesterday by the Further Education Funding Council.

At Derby, Professor Michael Shattock of Warwick University said that, although he found no fraud, there were “conditions in which fraud and malpractice can flourish”. Former principal Andrew Stromberg was condemned as “impetuous, arbitrary and abrasive”, while the governing body “failed the basic tests of acting in the public interest”. Nine members who received Pounds 16,760 in improperly-paid allowances should return the money, the inquiry concludes.

The St Philip’s report called for the removal of the chair and deputy. But the FEFC went further, urging dismissal of all 18 members over “seriously defective management”.

Labour education spokesman David Blunkett is to table questions in the Commons on the extent of mismanagement across the 467 colleges made independent from council control last year. “These two cases are an extremely serious and worrying indicator of the degree to which accountability has broken down, ” said Mr Blunkett.

But Stuart Webb, the former Wilmorton chair of governors - who the report says bears “significant responsibility” for failings - accused the Government of throwing business people into FE without advice or help, and said many other colleges faced similar problems.

“We have been crucified on the stake of Government incompetence,” said Mr Webb, who resigned last week, citing business reasons. He said guidance for governors was only issued after the FEFC inquiry began, while lay members who knew little about education depended on the principal. He insists he always acted in the college’s best interests.

The Shattock report, begun after protests from lecturers and local MPs, urges a “fresh start” at Wilmorton to overcome the damage of two years of mismanagement, with an urgent review of two deals totalling Pounds 500, 000 - for a restaurant and former nightclub - to safeguard its financial future. It says new governors should be chosen by Mrs Shephard, and must then appoint a new acting principal from outside college before a permanent replacement is found.

Two other Wilmorton governors have defended their roles. New chair Barbara Summers said her colleagues “haven’t done a bad job”, while Sandra Brookes staged a sit-in at the FEFC’s Coventry headquarters last week.

The St Philip’s report says the trustees, the Oratory Fathers, appointed a governing body which treated staff autocratically after it was decided to close the college.

Roger Ward, chief executive of the Colleges’ Employers’ Forum, said: “I am absolutely satisfied that the vast majority of FE colleges are run efficiently. ”