Teacher shortages and uncertain funding hamper colleges' efforts to improve adults' basic literacy and numeracy skills in England, inspectors say.
The report says some teachers lack the skills to do the job
An Ofsted report on "skills for life" says the limited progress that has been made is "not good enough".
The proportion of unsatisfactory provision in a rapidly expanding sector is "unacceptably high".
Colleges have welcomed what they see as Ofsted's endorsement of their complaints about underfunding.
Ofsted first reported two years ago on the government's strategy to tackle the poor basic skills of some 20 million adults.
t found "significant success", notably in raising the profile of the issue.
But it had considerable reservations about the quality of what was being provided.
Since then, its new report says, there has been some further progress.
Colleges are reaching more people through links with employers and other organisations and have access to "much improved resources".
But it adds: "A serious shortage of specialist teachers continues in this rapidly expanding sector."
It points to "the inadequate literacy and numeracy skills of a significant minority of vocational tutors".
"They are expected to teach literacy and numeracy when their own skills are insufficient."
The lack of skilled teachers "is exacerbated by short-term and uncertain funding arrangements" which hamper long-term planning.
The Association of Colleges chief executive John Brennan said he was pleased Ofsted recognised the great work colleges did.
"However, the very success of colleges in bringing Skills for Life from the margins into the centre of their provision, has led to the main difficulty identified clearly by Ofsted: staff shortages," he added.
"We are very pleased that Ofsted has spoken out about problems which colleges have themselves highlighted over the last two years."
The association has been warning that courses for adults were being cut this year because of government demands for improving teenagers' qualifications to be given priority.