The action against Highbury College comes after it was monitored by the further education commissioner Richard Atkins in October, 2019.
His team visited the site after it was revealed principal Stella Mbubaegbu CBE had claimed £150,000 in expenses over a four-year period.
The money went on luxury headphones, meals at Michelin-starred restaurants, first-class international flights and other items.
While targets were placed on the college after the visit, the new notice, which was served in November and published this week, said it must meet 'additional conditions’ to continue receiving funding from the government's Education and Skills Funding Agency (Esfa).
A financial statement for 2017/18 shows Highbury College received just less than £12m in funding and grants from the the Esfa that year.
In his letter to the college's chair of governors, Paul Lucken, from Esfa, wrote: ‘Whilst the FEC team recognises that the college has made good progress in delivering many of the recommendations there remains significant concern around the college’s leadership and governance, therefore Highbury College has been escalated to formal intervention.’
The new conditions include carrying out an assessment of the college’s ‘capability and capacity’ to improve, regular meetings between college leaders, Esfa and the FE commissioner, and the drawing up of an action plan with a focus on the college's governance and education standards.
Highbury College must also continue to give Esfa monthly finance updates, co-operating fully if the agency decides to carry out a third party business review.
A spokeswoman for the college said it has already made efforts to improve since being served the notice.
‘Following the notice to improve in November 2019, an immediate action plan has been implemented to address the concerns raised,' she said.
‘To date, significant progress has been made with the appointment of Professor Martin Doel, a national specialist on governance in further education, as chair and an experienced interim senior team to strengthen the organisation’s leadership and management.’
Education watchdog Ofsted has also been alerted to Highbury College's notice to improve.
It said the site requires improvement, after an inspection in April, 2018.