Up to 100 staff working for education body Elwa, Wales' biggest quango, are being made redundant.
Elwa was seen as the flagship for post-16 education and training
There were calls for an inquiry after the post-16 training body announced on Tuesday that it was "streamlining its organisational structure".
It is seen as the latest embarrassment for Elwa, the Welsh Assembly Government and Education Minister Jane Davidson.
Elwa ran into trouble almost as soon as it was established two years ago, and it said "slimming" the management structure and cutting jobs would mean it could "focus its attention on its prime objectives, whilst also reducing its running costs".
100 job losses can't go unnoticed... we must be told what role the education minister has played"
Plaid Cymru's Helen Mary Jones
Elwa said it would pave the way for "far-reaching changes to the way post-16 learning in Wales is planned and funded".
Helen Mary Jones, who speaks on education for Plaid Cymru, said the job losses were of "grave concern," in an "already very troubled institution."
"Let us now hope that Education Minister Jane Davidson will finally accept her responsibility for the incompetence of Elwa and agree to an urgent inquiry into its running," she added.
"One hundred job losses can't go unnoticed and clearly we must be told what role the education minister has played in the run-up to this announcement."
She said there were a number of issues around the financial management of Elwa and in the way it was set up, and getting rid of that many staff would not resolve the matter.
Education Minister Jane Davidson is directly responsible for Elwa
Ms Davidson declined to comment, but First Minister Rhodri Morgan said it was for Elwa to decide how to stay within its running costs and the number of staff it needed to do its job.
Mr Morgan told the Welsh assembly that Elwa was doing "a marvellous job increasing participation" and "introducing new concepts" in education and learning.
He said he had only just heard about the reorganisation, but Elwa was "still in the process of absorbing the predecessor bodies" and was trying to organise itself more efficiently.
Meetings were being held held with staff across Wales on Tuesday to explain Elwa's plans.
Directors said that changes would lead to greater clarity of responsibilities and a more simplified approach to decision-making within the organisation.
Elwa paid out £4m for the Pop Factory which is still unfinished
Elwa said between 90-100 staff would leave, most of them this autumn and the rest by next April.
"Staff have worked incredibly hard under very difficult circumstances to deliver results which illustrate that the organisation has met or exceeded virtually all targets - an achievement of which they can be very proud," said Peter Higson, acting chief executive of Elwa.
Liberal Democrat education spokesman Peter Black said the changes were at expense of training.
"Elwa are shuffling management posts around and putting people out of work without any reassurance that the problems with financial accountability and compliance have been addressed and while questions remain unanswered on up-front payments," he said.
Mr Black also said it was wrong that the education minister had failed to make a statement to the assembly about the job losses.
Elwa is made up of two bodies, one dealing with further education and another funding colleges and universities. In March it was announced that each would have its own chief executive and finance officer, creating four top level posts instead of two.
The new changes mean the number of corporate directors will be cut from nine to four, and will now be based in the south-east Wales regional office in Bedwas.
In March, Ms Davidson dismissed calls for her to resign after a education funding body received heavy criticism.
Elwa was pitched into deeper crisis after a damning report by the Auditor General for Wales Sir John Bourn described "wholesale failures".
Public criticism of Elwa grew after a BBC Wales investigation into the way Elwa awarded £4m worth of grants to the Pop Factory in the Rhondda.
It was claimed that £1m of the grant was allowed to sit in the company's bank accounts for nearly a year, accruing interest.
It was also claimed not a single job was created.