Gemma Waterhouse, 39, who was treasurer for Leven Pre-School, a charity which provides pre-school education for children, pleaded guilty in October to fraud and false accounting.
Hull Crown Court heard on Wednesday that initially there was a "real fear" the pre-school which had run in Leven, near Beverley, since 1974, may have to close and staff were left worrying that they may not get paid.
The fraud came to light in 2019 when HM Revenue and Customs wrote saying they were owed £16,235 in PAYE/NI contributions since 2012.
When Waterhouse was challenged by the charity's manager Dawn Whiting, she admitted it was a "complete mess", adding: "It's all gone, there's nothing left."
In a victim personal statement read to the court, Mrs Whiting said the last 21 months had been a "complete nightmare" for herself and others involved with the school, who felt "very angry, betrayed and deceived." The discovery of the fraud affected their Ofsted rating when they were inspected in 2019, dealing a "massive hit" to the nursery's "hard-earned reputation".
Waterhouse had been a "good friend and confidant" who she and staff turned to both professionally and personally for advice and they had socialised together at end of term and Christmas events. She added: "(She) was trusted by myself and other staff and committee. We had no reason not to."
She said their income had since stabilised, and with dedicated staff and the support of the current committee they'd come through this "terrible damaging" ordeal.
However the question of PAYE liabilities continued to hang over them, with HMRC awaiting the outcome of the police investigation.
Prosecutor Stephen Welch said Waterhouse had taken "considerable efforts" to hide her tracks, including faking signatures and changing addresses on correspondence from the pre-school address to her home address.
Mitigating Rachel Scott said Waterhouse was "very remorseful" and knew that what she had done was "quite frankly disgusting".
She said it had started with Waterhouse a "little bit of borrowing" to pay for bills, taking money and thinking she would "put it back", adding: "She effectively dug a hole, she kept taking from the charity and was unable to put it back."
Miss Scott said: "She feels a great deal of guilt, especially when it came to the point that people nearly lost their jobs. It wasn't something she intended to happen."
Waterhouse had been due for sentencing on Wednesday, but the case was adjourned until January because of a dispute over how much money had been taken.
The defence said the net loss does not exceed around £28,000, while the prosecution believes it is not less than £44,000.
Judge David Tremberg said the delay was "regrettable" but necessary to avoid providing grounds for an appeal. He warned Waterhouse she could face jail.