Student-enrollment declines and Dowling's high dependence on tuition for operating expenses pose financial challenges, the report said.
Fall 2012 enrollment was 3,034 full-time-equivalent students -- 10 percent less than in fall 2011. Since fall 2009, total enrollment has declined 32 percent, the report said.
However, Moody's said year-to-date financials "are positive developments" and that might enable Dowling to turn around its operating performance if it maintains "the same fiscal discipline in FY 2013 and FY 2014."
Salary cuts and non-faculty staff reductions in 2012 helped achieve "credit positive" savings, the report said.
Dowling spokesman Michael Conte said the Oakdale school has "contracted" its overhead structure "to make it consistent with lower enrollment."
"The past several years have, without question, confronted the college with stern financial challenges, but none of these were ever unknown to the board of trustees, especially the enrollment declines that were both anticipated and reacted to in our current budgeted expenditures," Conte said.
Moody's expressed concern about repeated turnovers in Dowling's presidency. President Jeremy Brown left abruptly last September before his 2014 contract expiration date. Elana Zolfo was named interim president.
But the report found a source of strength for Dowling, noting in 2012 it "generated $16,617 of net tuition per student, a 5.3% increase over FY 2011."
The report said Dowling's rating could be downgraded if it does not progress toward stabilizing enrollment and naming a permanent president.