A troubled college will have a cash shortfall of more than £500,000 written off as it moves to a new trust.
The future of Durham Community Business College (DCBC) was discussed at a Durham County Council cabinet meeting.
It will be taken on by a multi-academy trust in January next year, with financial support from the government.
The council will write off hundreds of thousands of pounds from the college's budget, which has been in the red for years.
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John Pearce, the council's children and young people's services director, said on Wednesday (September 14): "It is essential that DCBC has a sustainable future."
He outlined turbulent history of the college, which had been in the former Durham Federation since 2009.
Mr Pearce said: "It's had a challenging time since 2014 when both schools in the federation were rated inadequate by Ofsted."
Under an academy order from the government, it was then run by a trust, Bright Tribe.
But this trust was investigated for fraudulently using public funds in running 10 schools, a case later highlighted in a Panorama documentary, says a council report.
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Mr Pearce said: "In 2016 following very significant concerns being raised nationally about Bright Tribe, all schools were removed from its trust."
He told how DCBC's pupil numbers fell following the Ofsted inspection and "leadership challenges", a new sponsor was not found, it reverted to council control in 2018 and ran at a deficit for three years.
"Pupil numbers have continued to fall and it is not sustainable to reduce spending further without significantly compromising the quality of education," added Mr Pearce.
"All other secondary schools within the place planning area are oversubscribed and a thriving DCBC will be a critical part of meeting the demand for future secondary places."
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He said the estimated deficit was between £570,000 and £650,000, and the council would meet the costs from earmarked reserves.
It is proposed to move the school into a multi-academy trust, the Advance Learning Partnership, with support and national funding from the Department for Education.
"Officers believe the recommendation provides the best option to secure education provision of children living in the area," said Mr Pearce.
Councill Ted Henderson, cabinet member for children and young people's services, said: "The council has a strong and effective working relationship with the proposed trust.
"The Department for Education is supportive of the proposals, identifying the needs to preserve pupil places. They have committed to provide additional financial assistance to improve school buildings and support the transfer.
"This will be of great benefit to the children and the community. This will deliver a financially viable solution for the school's future, improve the educational standards and secure further growth in the pupil amount.
"The growth of the school will allow all pupils to benefit from a wide curriculum and increased staffing levels, which will support more specialist teaching across all subjects.
"All of this will provide better education outcomes for the children."
Cllr Richard Bell, deputy council leader and cabinet member for finance, said the school's circumstances were "unique", as was the deal to broker the new transfer.
He said: "We need the capacity in this pupil planning area and cannot afford to lose this school.
"But without action there is the prospect for significant deficits to be built up over the coming years.
"I believe the school will go from strength to strength post-transfer.
"Decisions to write off deficits are not to be taken lightly, but just as the council has done so in the past... so we must now for the Durham Community Business School."
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