It is that time of the year again. Colleges are receiving their final funding allocations for the next academic year. But it is also the wrong time of the year.

College principals are encouraged to be entrepreneurial and business- focused. Receiving their allocations a few weeks before the new academic year and at the end of a complicated new process could induce a risk- averse attitude to planning next year’s provision, rather than the forward-looking and balanced position that government seeks.

Association of College (AoC) members have varied concerns over the next academic year’s funding round process - in particular about transparency, flexibility and how a new formula affects their ability to plan. This has direct consequences for staff and students. Late budgets force quick decisions and short-term cuts.

2008 was always meant to be challenging. Ministers published a further education white paper two years ago which set out plans for a “demand-led system” intended to make further education more responsive to employers.

We see the consequences two years down the line. There is a new funding formula, a new system for calculating allocations and more demanding adult learning targets. The creation of two departments for education mean there are new rules preventing financial transfers across the age-19 divide.

Change is the stuff of life for colleges, but this year is proving to be a case of too much done too late. We are in June, and still they don’t know how much money they have to spend on adult learning, Train to Gain or apprenticeships.

Despite extended negotiations, some colleges do not know why they are facing cuts of hundreds of thousands of pounds. The delay and disruption are not conducive to sensible planning and they will make it harder for colleges to deliver.

While the AoC will keep up the pressure on the Learning and Skills Council (LSC) to stick to the original timetable for next year and to resolve queries promptly, the real challenge now is to make the system better for the academic year 2009-10.

Mark Haysom, the LSC’s chief executive, has agreed to carry out a review. We have offered to help and we have also requested flexibility in the operation of the new formula. Ambitious projects are more likely to succeed if there is a settling-in period. We are asking for some room to manouvre for colleges in how they manage their budgets in the next 12 months.

Colleges will also want to start work now on the system that will carry through into 2010. The funding machine needs to be in the best possible condition before it is handed over to local government and new national agencies. This year’s funding round has been difficult for colleges, but it is also a rehearsal for a new world in which money comes from a number of different sources.

The Raising Expectations white paper creates daunting challenges, but the college sector has never been stronger. Colleges are in a position to deal with whatever comes next. They have attracted record numbers of young people and account for two-thirds of 16- to 18-year-olds in education. They provide half of all entrants to higher education and have recently acquired powers to validate foundation degrees. They have responded vigorously to the call to engage with employers and offer workplace learning.

Whether judged by inspections, student satisfaction or finance, they are succeeding. A process that delivers funds in a timely and transparent way will help sustain this progress.

Martin Doel Chief executive, Association of Colleges.