The system, which was designed to shift some of the cost of operating the schools onto the backs of the students and missionary organizations, led constantly to overruns and departmental crackdowns. Nevertheless, this was the funding pattern of residential schools until the 1950s.

    The per capita financing system proved counterproductive. By shifting the financial burden onto the school children, it made the schools even more unattractive and, therefore, less economical. Recruiting new students for the industrial and boarding schools, an area that had been fraught with difficulty on the prairies, now became a matter of acrimonious and intractable conflict. Obviously, it was critically important for a school to keep its enrolment up to the maximum authorised by Ottawa - known as the 'pupilage' - for the simple reason that every student below this figure meant a loss of income.

In fact - and the long-term implications of this were important - numbers enrolled now were more important financially than students graduated.

These new financial pressures created a descending spiral of problems for schools operating under the per capita system. Reduced funding drove principals both to economize on major expenditures such as food and to extract more revenue from the shops and farms in order to replace purchased supplies with ones made or grown on the premises. Yet it was not possible to hire more staff to perform the extra work involved. More labor was expected of students, while simultaneously the school sought to limit the food they were receiving.