Leaders parachuted in to a school embroiled in a campaign to prevent it from becoming an academy have found a £1m overspend in the accounts.
The government approved an interim executive board to take over Sedgehill School, in Lewisham, London, in January.
The council argued the school, which is judged as required improvement by Ofsted, needed help to improve.
The take over occurred despite hundreds of pupils, parents and staff campaigning against the new interim board, and submitting a petition with 1,500 signatures.
But the saga has taken a new twist after the board discovered a near £1m deficit in this year’s books. The board wrote to parents last week to warn of the “serious” situation.
The letter read: “Teaching and learning has been our priority since we took office in January 2015.
“We received a comprehensive set of handover documents from the outgoing governing body on a range of matters and we ensured that these were addressed.
“The school leadership was projecting a manageable budget overspend in the region of £45,000 for the 2014/15 budget year.
“However, when we investigated this further it soon became apparent to us that this was wholly inaccurate, and the deficit was in fact much bigger than this at more than £900,000, which is a very serious situation indeed.”
The board says it has been working urgently with new chief executive officer and education troubleshooter Julia Scannell to draw up a recovery plan.
It hopes the plan will allow the school to “emerge from this situation without significantly affecting the curriculum offer to students”.
It will be submitted to the council for approval before parents are given more details.
The school did not respond to a request for comment from Schools Week.
Martin Powell-Davis, branch secretary of Lewisham NUT and a parent at the school, said: “The letter came as a shock to everybody. We thought the main problems were the exam results.”
He has been helped organise the campaign supporting the former school leaders, amid fears Sedgehill, along with two other Lewisham schools, are being eyed up as potential academy convertors.
The union has also threatened strike action.
“There is still concern an agenda may now be in place and the Government will use that to become an academy,” he added.
“But our immediate concern is about the stabilisation and morale of staff if major changes are imposed.
“We hope any changes will be made with staff and parents rather than imposed on them. It can be destabilising if not done with support of parents and the community.”