He was commenting on the aftermath of events at Clydebank College before Christmas when students walked out in protest at the non-payment of promised bursaries. This would have meant 104 students facing the prospect of being forced to quit their courses, but for a last-minute deal with the Scottish Office. The money finally came through on Christmas Eve.
A similar situation had arisen at Edinburgh's Telford College last October when 91 students who made late applications for courses found the bursary allocation had run out in mid-September. Like Clydebank, Telford's solution involved the waiving of fees.
Joe Mooney, Telford's deputy principal, said they had to raid general college funds and attract business sponsorship to ease the pressure. He added: "Students should be studying and not forced to worry about where their next penny is coming from. Some of them don't even have enough money to eat properly."
Mr Kelly forecast that the level of financial provision for bursaries would not be able to cope with the increased demand for further education, particularly when colleges' general funds are under strain from an adverse Scottish Office grant settlement (TESS, January 3).
He added: "The problem is that funding has been made on the basis of what the regions awarded when they ran the colleges rather than on the situation which exists at the moment." Mr Kelly denied the colleges had mismanaged the transfer of the bursary funds from the local authorities who retained responsibility for bursaries until last April, two years after incorporation.
The ASC argues that awards are in fact being administered more efficiently than before and that problems have only arisen because of the success of colleges in attracting more students. This view was endorsed by Rae Angus, principal at Aberdeen College. It awarded 1,900 bursaries this session, which was 300 more than Grampian disbursed from the same #163;3.5 million.
"We will be able to live within that budget and we have been able to benefit more students without having to turn anyone away," Mr Angus states."We believe we have achieved that by better housekeeping."
But the bursary system remains open to criticism by some college managers for its inconsistency, unfairness and inability to cope with short-term increases in demand for places. Sudden strains can be imposed on bursary funds if there is a rise in applications from groups such as single parents, whose dependents are eligible for support.
Peter Duncan, principal of Central College of Commerce in Glasgow, argues that a national system, similar to the grant and loan regime for higher education students, is required to manage bursaries.
"The system is flawed in that it can't be managed on a micro, college-level basis. Individual colleges can't accurately predict how much money they are going to have to spend because their sample size is too small. They don't know what to expect statistically. "
Central College estimates that it will have to spend between #163;170,000 and #163;200,000 more than it has been allocated for bursaries this year. Mr Duncan says his college will be able to cope only by curbing the amount of money paid out in travel expenses, coupled with greater means-testing of the awards. And he did not rule out withdrawing bursaries from older students with dependents.
Joyce Johnston, principal of Fife College who worked until recently as a Scottish Office official on the FE funding methodology, feared bursary problems next year. "Bursaries are now cash-limited which they were not under the local authorities and which student awards in higher education are not. That is a gross inequity. "
Mr Duncan's views are echoed by Martin Fairbairn, director of finance at Stevenson College in Edinburgh. "The size of the cake is too small and the system for allocating money unfair. What's happening is a country-to-town drift in college numbers.
"Previously local authorities would not fund studies outside their own areas, but colleges in the cities are finding more students prefer to come to them rather than their local college. The Scottish Office has yet to take that into account."
Ewan MacLeod, the student president at Clydebank College, is one who will be hoping to avoid a repetition of last term's events. He was left with no money, which meant he could not eat properly. "I was forced to ask my parents to come and get me because I could not afford the fare home," he says.