You are assessing the financial condition of Teddy County. As part of your assessment, you obtain the following summary of the General Fund column of the statement of revenues, expenditures, and changes in fund balance for Teddy County for the year ended June 30, 2012.
Total revenues.................. $ 14,350,000
Total expenditures............... 14,755,000
Excess (deficiency) of revenues over expenditures.... (405,000)
Other financing sources (uses):
Transfer out to Library Special Revenue Fund ..... (235,000)
Proceeds of debt................ 650,000
Total other financing sources (uses) ......... 415,000
Net change in fund balance............. 10,000
Fund balance— beginning of year .......... 165,000
Fund balance— end of year ........... $ 175,000

Analysis of county revenues shows that approximately 50 percent are from the sales tax. The year- end fund balance is entirely classified as Unassigned. On inquiry, you learn that the county makes transfers every year to the Library Special Revenue Fund to finance the library’s operations and that the county sold $ 650,000 of bonds during 2012 to finance a looming deficit for the year.
Make a preliminary assessment of Teddy County’s financial condition, based on the financial information provided here. Consider the following factors in making your assessment:
(a) The county’s operating margin,
(b) The quality of the operating margin,
(c) The budgetary cushion, and
(d) Relevant credit- rating agency rules of thumb.