Local authorities have called for the right to control FE funding for adults up to the age of 25.
Even before councils take control of the money for 16- to 18-year-olds in April next year, Margaret Eaton, chair of the Local Government Association (LGA), told the Association of Colleges conference that funding locally was better than using national bodies.
Ms Eaton is a former leader of the Conservative group on the LGA, but the view puts her at odds with Tory policy, which favours restoring an equivalent of the Further Education Funding Council for England.
But she also said the Government's involvement of regional development agencies in skills planning could be a "backward step", and local authorities should take the lead.
Ms Eaton, the LGA's first female chair in its 11-year history, said that top-down, centralised systems should be replaced with a seamless 16-25 funding system that puts individuals ahead of institutional interests.
"In post-19, national planning won't work either," she said. "We want to see the end of artificial age barriers as they turn 16, 18 and 21. We risk losing people because of the way money is rationed along artificial boundaries on institutional lines.
"We should be building a system that meets the needs of students, not government departments."
Local government's strength was its closeness to the communities it served, she suggested.
"Local authorities are far better placed to make these decisions and meet these needs than unelected quangos," she said.
Principals and college managers at the conference were not confident about the handover of 16-18 funding to local authority control next year, however, and some crucial decisions about the way the new system would work have still not been settled.
Addressing a panel from the Department of Children, Schools and Families (DCSF), the new Young People's Learning Agency (YPLA) and councils, delegates questioned whether the upheaval in the funding system would benefit students.
They urged funding bodies to tackle small, inefficient school sixth forms and the inconsistencies between colleges' and schools' reporting of success rates and other data, which allow schools to hide information such as drop-out numbers.
The organisations represented on the panel refused to answer whether colleges would be expected to follow the school rules on the data they collected, or whether schools would have to adopt the more rigorous college approach.
The lack of comparability stands in the way of Framework for Excellence allowing a proper assessment of different institutions' performance, so local authorities can ensure they are commissioning the best possible provision.
Sue Baldwin, director of young people's participation and attainment at the DCSF, said: "We should ensure we don't allow the mechanics of this system-building to get in the way."
A "snagging team" would be established to troubleshoot any problems after April, she said.
Rob Wye, director of strategy and implementations at the YPLA, said they had put a considerable effort into planning how the new funding system would work "in theory".
"Now we need to see if it works in practice," he said.