The letter, signed by the school's board chairman Andrew Fox, said: "You may be aware of reports in newspapers, on radio and social media of fake cocaine props at our annual fundraising ball on Saturday night.
"Yes, fake cocaine, in the form of icing sugar, was one of the many props and decorations displayed as part of the satirical Las Vegas theme: Vegas, Baby. In hindsight, this was an inappropriate choice of prop and we apologise for the offence it may have caused some people and for the reaction that has followed.''
Fox said the school did not encourage illegal or excessive drug-taking and pointed out that no children attended the ball, which was held at the school hall on Saturday.
"Unfortunately, the publicity over the decoration has dwarfed the huge amount of planning, work and passion [Friends of Northcote School] put into the ball, which raised approximately $28,000.''