Alison McWilliam left her local summer festival committee with just £0.18 in its account in 2014, a sheriff court was told last year.
The modern studies teacher from Duns, Scottish Borders, ended up with a criminal record and is now fighting for her career in front of the General Teaching Council for Scotland (GTCS).
The 56-year-old was sacked from her job at Kelso High School and could be struck off if the GTCS find she is unfit to teach.
At a hearing in Edinburgh, McWilliam revealed that she was involved in a car accident in 2014 which resulted in the death of an elderly woman.
She said: “I turned to gambling to occupy my mind, but it became a crutch.”
McWilliam explained that she was now better at dealing with stress, saying: “My son was at the Manchester Arena when it was attacked.”
She said that discovering her son, Grant, 22, had been at the Ariana Grande concert left her “stressed and emotionally vulnerable”.
“It really put me in a difficult position,” she said.
“I spoke to people in my support network, family members were up and around as well because they were anxious. I used my medication well, and used the people around me well and wisely.
“I am a good person that did a bad thing, I made a mistake. I would ask for fairness, to judge me by what I do.”
McWilliam admitted that she had gambled on occasion throughout the past year, but very rarely, and was undergoing counselling and attending Gamblers Anonymous meetings.
Grant himself gave evidence to the GTCS, telling them: “Before the accident, my mother was a socially active person.
He added that after the incident, and around the time of her arrest she became “completely insular” and saw the house as a “safe haven”.
When asked how he could be sure that she would not reoffend, Grant said: “It’s down to having a front row seat to her fall from grace.
“She had to step away from the job and life she loved, she wouldn’t want to do that again.”
McWilliam’s defence lawyer, Jamie Foulis, admitted that his client’s ability to teach had been impaired, but insisted she is not unfit to teach.
He said : “Her conduct is remediable, and has been remedied, or is at least in the process of being remedied.”
But GTCS presenting officer, Deborah Russell disagreed, saying: “This is a very serious complaint. It’s not an insignificant amount, done at a time when the registrant was in a position of trust.
“In my opinion, her insight is limited and the risk of recurrence remains.”
McWilliam, who had been a member of the Duns Summer Festival committee for 15 years, and Treasurer for eight, repaid the money after she was convicted of embezzlement.
She told the group in a letter: “I have betrayed your trust and friendship and I am truly sorry.”
“I know that repayment doesn’t fix what I did, but I hope it shows my attempts to make amends.
“It appalls me, the depths to which I had sunk. I was very ill at that point, I was ill. It doesn’t reflect who I am. I despair at how low things had got.”
The hearing continues.