Good for you taking the high ground. I hope that this works for you and that on behalf of the kids you get all the money back.
That said, I agree with Tim. Unfortunately, those of us with the best of intentions sometimes get burned the worst. As soon as you said "with moving she lost receipts" I was concerned about whether she has already moved or is planning to move - be sure you know where to reach her all the time. Hope it doesn't come to that.
I hope that works for you. I'd personally caution others from going the route of writing "confession" documents or signed letters of agreement without the assistance of an attorney. It's serious stuff and should be treated so, in my opinion.
Not being an attorney, I don't know if there's trouble you can get in, but I would tread carefully.
First of all, thank you all for your comments and suggestions. After last night, there is light at the end of this dark tunnel. We had an emotional rollercoaster ride last night. The four officers met to decide the fate of the future of this situation. After the first 30 minutes of trying to decide whether or not to take this to the DA I finally made a motion to call the former prez one last time and give her one last effort to explain what was going on. I called her and she was home and I asked her if she could come to where we were meeting. I told her that our first PTO meeting was scheduled for next Monday and we needed to close our books and try to get as much info from her as possible. She actually agreed to come! That alone was a surprise because we've been trying for a year to get her to talk to us with no response. She arrived and for about 30 minutes we listened to her beating around the bush about her moving and not being able to find receipts, blah-blah-blah...finally I made the statement. I couldn't take the lie after lie any longer so I looked her straight in the eye and told her she had two options. She could either come clean among the four of us or we were taking everything over to the DA at 8 am this morning. Her eyes got watery and emotions started flowing and she finally admitted to everything and we worked out a payment plan. We did everything in writing and had her sign a statement that she agreed to pay a certain dollar amount by the last day of the month. We put a stipulation in the statement that no other payment arrangements would be accepted and that any tardiness with payments would consitute the statement void and we would turn everything, including her confession, to the district attorney. So needless to say, we all slept better last night and no, I'm not resigning...
Dang - and I kept telling myself that the good folks on this board were the ones not affected by what we keep reading in "The Latest News". I am so feeling for you right now.
I feel like I don't have much to add other than to echo that the reason you got into this group was for the good of the kids - so please stay and see your heart through. As for the bad seed, you need to follow your head on that one. It is doubtful that if the person had the need to steal it they have the wherewithall to repay it, but if it were me (and if my board is here you better NEVER put me in these shoes!) I would talk one on one with the person and tell them that in 24 hours I'm going to the authorities and then follow through. Have your facts in hand and do what you need to do. You can email me (I'll give you my phone number and you can call me) and I'll be there with you emotionally while you go through it.
The school's involvement, or lack thereof, is upsetting as well. I agree with Metzy - "keep quiet for our sake" and "we can't get involved" - they seem to be talking out of both sides of their mouth. That leaves the front of their mouth to come to you later in the year for money.
Good luck and Godspeed. Let us know if we can help in any way, but DON'T QUIT!