A primary school "needs to take urgent action" to resolve financial management failings, inspectors have said.
An Education and Skills Funding Agency (ESFA) investigation found Langdale Free School's revenue deficit was about £226,000 larger than had been budgeted.
It also found the Blackpool school was not "transparent" about the cost of flying trustees to a meeting in Ibiza.
A trustee said the meeting did not cost the school "a penny" and the larger deficit was due to a property purchase.
The ESFA review in January followed a tip-off about financial mismanagement at the school.
The report found serious weaknesses in the school's financial governance, breaches of the school's funding agreement and a lack of transparency over reporting arrangements.
It raised "serious concerns" over the school's long-term viability as its accounts showed it would be in a net revenue deficit position by the end of the academic financial year.
The watchdog issued a number of recommendations and said "urgent action" must be taken to resolve the issues.
The Langdale trustee, who asked not to be named, said the workshop in Ibiza had not cost the school "a penny", as it was paid for by a company which "provides corporate services to the school".
He also said the revenue deficit, which the ESFA found to be £238,000, was due to the school using surplus funds to purchase an adjacent property, which he added was "evidence of good financial management".