The Association of Colleges says there is too little time to train finance directors and prepare staff. It has also called for an overhaul of the management information systems which enable colleges to plan their budgets.

The three-year funding regime to help colleges plan spending further ahead, was scheduled to be in place in August.

On the eve of the 10th anniversary of incorporation, when colleges were released from local education authority control, principals fear a repeat of the problems faced when the current funding regime was introduced.

David Gibson, AoC chief executive, said: “I can think of nothing more disastrous than the imposition of a regime that fails to deliver. Reforms were rushed when colleges were incorporated in 1993. With no time for proper training, mistakes were made and the result was more audits and red tape. We are in danger of doing the same again.”

But Ken Pascoe, Learning and Skills Council director of operations, said:

“Colleges will have their budget allocations by early May, leaving three months for final preparations. There will be much less bureaucracy. The only information we will want is that which colleges would need for good management.”

In a critical response to a recent LSC circular, the AoC says multiple targets and reviews will increase red tape. It says while parts of the circular promised less bureaucracy, others would work “in the opposite direction”.

“The performance-related funding regime will lead to divergence in funding levels between institutions,” says the AoC in its response.

“Less-favoured institutions will find it increasingly hard to improve performance to the level of the best, with the least favoured on a downward spiral.”

In its strategy for FE, Success for All, the Government wants payment by results, giving the biggest rewards to the most successful. But the AoC is concerned that the interpretation of the LSC will destabilise the least successful.