Colleges in the Midlands fear losing millions of pounds worth of training contracts as the future of their local training and enterprise council hangs in the balance.
Initiating a Pounds 1 million fraud inquiry at Central England Training and Enterprise Council, lifelong learning minister Kim Howells indicated last week that he wanted to see the CENTEC closed.
Central England business leaders and the TEC board have until November 14 to present ministers with a restructuring plan.
But Dr Howells said: "On the evidence available, I would prefer to see its responsibilities pass to neighbouring TECs. CENTEC itself has for some time been trying to tackle serious weaknesses in the relationships with local partners. But progress has been slow."
But Roddy Skidmore, chief executive of the TEC, said that there was nothing to worry about.
"We have a very strong case to retain and build a success out of the TEC. There is no question whatsoever of CENTEC being financially insolvent. Indeed, under our current plans we will be viable well into the future," he said.
Dr Howells's call came after allegations of fraud against one of the TEC's training providers, Employment Link. Now the TEC's other training providers, including Kidderminster College, North East Worcestershire College and the Solihull College, fear their training contracts will be scrapped.
Kidderminster College has a contract worth around Pounds 300,000 with CENTEC this year.
Anthony Batchelor, deputy principal, said: "For a small college like ours, this is a significant proportion of our budget, especially when added to the fact that the further education funding council is putting the squeeze on."
He said that the college had entered into contracts in good faith, "and the viability of existing programmes shouldn't be threatened".
Harry Sutton, principal of North East Worcestershire College, said that he had Pounds 750,000 of contracts with CENTEC.
He said: "We're nervous. We have no information. I understand there are no moves to wind CENTEC up in terms of insolvency, and that they are financially sound, but if it is closed we'll have a battle to win similar contracts."
But Mr Skidmore insisted that comparisons should not be made with South Thames Training and Enterprise Council, which went into liquidation owing local colleges millions of pounds in 1994. "It must be made very, very clear," he said. "The cases are totally different."