No. You really can't lose lots of water via evaporation although you certainly could lose more than the average pond with all the surface area of the rock pile. Since you loose lots of water when the pump is off, it is something else. BTW, even an eighth of an inch a day is probably caused from some extra wet splashed areas.

I guess we need to know how water is pumped up to the falls. Is the pump in the pond? Does the hose go thru the bottom or side of the pond? Some hoses never get out of the rubber liner and that would suggest a tear. Otherwise, other than leakage where a pump line might go thru the liner, we would expect a loose or cracked pipe. There may be other issues that I am not familiar with if you have an external pump. I am of course assuming that this pond has a liner rather than cement.

The pond has a liner. The water line to the waterfall runs up the outside of the pond to the right. I had the original company who installed the pond out a few weeks ago and they said that line isnt leaking because the ground isnt wet. I dont think that is a definitive answer. I turned off the waterfall to see how much I lose when the waterfall isnt running. I just measured the water level and it is 17 1/4 inches deep at the very center. I will measure it again later today.

Evaporation can cause more water loss than one might think but turning off the falls is a good idea. I'm kind of surprised to hear that's a professionally built pond - most pros would stay away from the rock pile look waterfall. Unless like you said the customer had a vision and they complied. Otherwise it's a lovely pond!

And I agree by the way with your concern that the rocks in the bottom are too much. i would remove them and either leave the liner bare or (my preference) add a shallow layer of small river rocks.

To find apond leak here in Rochester NY, we have the homeowner do a series of tests to narrow it down. First, top off your pond and turn off your pump for 24 hours. If the water level in your pond does not go down after 24 hours then the leak is in the waterfall. 95% of the time the leak is in the waterfalls and it may be necessary to rebuild your waterfall. We always cover the pond liner with rock and gravel to protect the liner from UV rays and help to make it look natural.