In its response to the post-16 review, the association praises the achievements of the FEFC: "We believe the present system of education and training derives considerable strength from the success of the FEFC.
Improvements can be made, but should capitalise on this source of strength."
The new, improved body should continue to fund colleges directly but adult education and sixth forms should be funded through local bodies, the association says.
Because of the complexity of post-16 education and training, the association believes school sixth forms should be funded locally but subject to a common funding regime and tariff for courses.
But if LEAs are cast in the local role, then there should be sufficient safeguards to guarantee the earmarking of the funds.
"We have reservations about the effectiveness of local lifelong learning partnerships which are as yet untried and untested," the college managers said.
But they could be used to identify and fund specific projects or support local initiatives, they added.
The association favours a single inspection system for all providers of post-16 courses, but it prefers the FEFC model to that of OFSTED, especially the internal representation of colleges on inspection teams and the emerging framework for college self-evaluation.
The independence of college governing bodies is seen as a major strength of the system which has developed over the past six years, and which has achieved a 30 per cent increase in participation and 26 per cent gain in efficiency.
"It is vital that the experience of these governors continues to be harnessed in the new set-up," the association says, but it warns: "There is a danger that an ill-considered planning regime imposed on the post-16 sector will alienate governors and drive them away.