The City of Bath College has been praised by Ofsted for its strong leadership and a successful financial recovery.

Inspectors visited the college in January and graded it satisfactory for the overall effectiveness of its provision.

However they said its capacity to improve and the leadership and management team were both good.

The Avon Street college had been in severe financial difficulties four years ago and was given a cash injection of £1.8 million by the Learning and Skills Council and placed in official recovery in March 2006.

At its worst it was projecting a deficit of more than £1 million for 2005/06, but inspectors said they were pleased with they way things had been turned around.

A new leadership team is now in charge and at the end of the last financial year the college was £221,000 in surplus.

Inspectors also praised the improvements to teaching standards and the students' contribution to their college and the wider community.

Principal Matt Atkinson said he was happy with the outcome of the report and thanked everyone involved for all their hard work.

He said: "Over the past two-and-a-half years we have been on a rigorous journey and this inspection report shows that we are on track to meeting our ambition of being an outstanding college by 2012.

"As well as recognising numerous strengths, the report also highlights where we need to make further improvements and we will be working hard to ensure all of our students, irrespective of what they are studying at the college, receive an excellent level of education and training.

"We really welcome this report and will use it to refine our aims and objectives as we move forward."

He said anyone who had read the previous Ofsted report in 2007 would recognise the significant progress the college had made, particularly in the quality of teaching and learning.

"This report recognises the efforts of everyone at the college - staff, students, partners and governors - and I would like to offer my thanks to them for the significant contribution they have made to our improvement programme."

Mr Atkinson said that the financial turnaround had been partly due to initial efficiency measures such as redundancies, but mainly improving standards and results to secure more funding over the past four years.

Inspectors also said they were pleased with the way in which the college's exam success rate was catching up with the national average.

The college's art and design department was graded as outstanding and literacy, numeracy English as a foreign language and hairdressing and beauty were deemed to be satisfactory.

However more work needs to be done improve the sport, leisure, tourism and travel department, which was rated as inadequate.

Inspectors said they were pleased with the way the college was developing and believed it would continue to improve.

The report said: "Following considerable financial instability, finance and budget management have improved greatly and are now good.

"Governors and leaders have been successful in guiding the college through a difficult period and assuring its financial stability, at the same time as investing in resources and improving the quality of provision."