Llanfyllin High School is accused of breaking council rules by subsidising transport to almost 200 pupils outside catchment, including 140 from England.
Governors claimed the council was aware of the school's action and said any repayments could penalise pupils.
The school could be asked to repay £100,000 from the last year's spend.
Powys council cabinet is meeting on Tuesday afternoon to consider a report recommending the school repays the money.
The council investigated the school's accounts after being contacted by the Wales Audit Office and found it had spent more than £460,000 during a five-year period subsiding transport to pupils from outside catchment.
The dual-stream school - which has more than 80% of pupils in the English stream and fewer than 20% in the Welsh stream - has more than 800 students on its register.
Supporters of Welsh-medium education said the move had become "a direct threat" to Welsh-medium education in Llanfyllin.
A Powys school which spent nearly £500,000 over five years to bus pupils from outside its catchment area may be asked to repay some of the money.