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As charitable organizations expand their programs and services across New Mexico, financial oversight becomes increasingly important. State law requires larger nonprofits to provide additional financial transparency through independent financial statement audits, helping ensure charitable resources are managed responsibly.

Unlike many states that base audit requirements on revenue or charitable contributions, New Mexico now uses total expenses as the statutory measurement. For fiscal periods beginning on or after January 1, 2024, a charitable organization with total annual expenses exceeding $750,000 must be audited by an independent Certified Public Accountant (CPA). The requirement comes from NMSA 1978 § 57-22-6(C), as amended by 2023 Senate Bill 240. (NMSA 1978 § 57-22-6(C); New Mexico DOJ, Charitable Organization Auditor Changes)

Because New Mexico focuses on total expenses rather than fundraising totals, nonprofit leaders should monitor spending throughout the fiscal year when determining whether the statutory audit threshold will be crossed.

Whether your organization serves Albuquerque, Santa Fe, Las Cruces, Rio Rancho, Farmington, Roswell, Clovis, or communities throughout New Mexico, planning ahead for an audit can help ensure smooth annual compliance and stronger financial governance.

New Mexico Audit Requirements at a Glance

Quick Answer

If your New Mexico charitable organization has total annual expenses exceeding $750,000, New Mexico requires an audit by an independent CPA. An organization at exactly $750,000 does not cross the statutory threshold based on amount alone. The New Mexico Department of Justice also notes that the updated threshold applies to fiscal periods beginning on or after January 1, 2024. (NMSA 1978 § 57-22-6(C); New Mexico DOJ, Charitable Organization Auditor Changes)

When Does New Mexico Require a Nonprofit Audit?

New Mexico bases this audit requirement on total expenses rather than charitable contributions or gross revenue. (NMSA 1978 § 57-22-6(C))

Organizations generally follow this reporting structure:

New Mexico does not establish a separate mandatory CPA-review tier below the audit threshold in § 57-22-6(C). Organizations should still comply with the state’s annual registration and reporting requirements, and the Attorney General may require an audit below the threshold when the public interest warrants it. (NMSA 1978 § 57-22-6(C))

How New Mexico Measures the Audit Threshold

New Mexico measures the audit threshold using an organization’s total expenses for the fiscal period. This replaced the prior rule that used total revenue. The change took effect January 1, 2024. (2023 N.M. Laws, ch. 43; New Mexico DOJ, Charitable Organization Auditor Changes)

Expenses reflected in the organization’s financial statements may include:

• Program service expenses
• Salaries and employee benefits
• Occupancy and facility costs
• Administrative expenses
• Fundraising expenses
• Professional services
• Grants awarded by the organization
• Other operating expenses

Because the statutory test is based on total expenses, organizations with expanding programs or operations can cross the audit threshold even when fundraising does not increase at the same pace.

For nonprofits experiencing rapid expansion, tracking expenditures throughout the year is just as important as monitoring revenue.

New Mexico Law at a Glance

The New Mexico Department of Justice Charities Unit administers charitable registration and annual reporting under the Charitable Solicitations Act. Charitable organizations that exist, operate, or solicit contributions in New Mexico generally register through NM-COROS and submit annual reports unless an exemption applies. (New Mexico DOJ, Consumer Affairs – Charities; NMSA 1978 § 57-22-6)

For fiscal periods beginning on or after January 1, 2024, organizations with total annual expenses exceeding $750,000 must obtain an independent CPA audit. New Mexico law does not create a statutory CPA-review tier below that amount. The Attorney General may nevertheless require an audit when there is reason to believe doing so is in the public interest. (NMSA 1978 § 57-22-6(C); New Mexico DOJ, Charitable Organization Auditor Changes)

Because operating expenses can fluctuate from year to year, nonprofit leadership should review projected expenditures well before fiscal year-end to determine whether an audit will be required.

Preparing for a New Mexico Nonprofit Audit

Organizations approaching the audit threshold should begin preparing several months before fiscal year-end.

Your CPA will typically request:

• General ledger
• Trial balance
• Expense schedules by functional category
• Payroll records
• Vendor invoices
• Grant expenditure schedules
• Bank reconciliations
• Board meeting minutes
• Fixed asset schedules
• Investment statements
• Internal control documentation
• IRS Form 990
• Prior-year financial statements

Maintaining detailed expense records throughout the year can significantly improve audit efficiency and reduce year-end adjustments.

Common Reasons New Mexico Nonprofits Reach the Audit Threshold

Many New Mexico nonprofits become subject to the statutory audit requirement because total expenses increase as programs and operations expand.

Examples include:

• Expanding community service programs
• Hiring additional staff
• Opening new facilities
• Receiving large program grants that increase expenditures
• Launching statewide initiatives
• Increasing operational capacity to serve more beneficiaries

Since New Mexico measures total expenses, organizations should monitor spending trends throughout the fiscal year instead of focusing solely on incoming revenue. (NMSA 1978 § 57-22-6(C))

Benefits Beyond Compliance

Although New Mexico requires audited financial statements for larger charitable organizations, an independent audit also provides meaningful operational benefits.

A financial statement audit can help your nonprofit:

• Improve board oversight
• Strengthen internal financial controls
• Increase donor confidence
• Enhance grant competitiveness
• Improve financial reporting accuracy
• Demonstrate accountability to regulators
• Support sustainable organizational growth

Many organizations find these advantages extend well beyond meeting annual filing requirements.

Why Choose ELT CPA LLC?

ELT CPA LLC provides independent nonprofit financial statement audit services for charitable organizations throughout New Mexico.

Our professionals understand nonprofit accounting standards, charitable reporting requirements, and the expectations of the New Mexico Office of the Attorney General. We work collaboratively with nonprofit leadership to perform efficient audit engagements while minimizing disruption to daily operations.

Whether your organization is preparing for its first required audit or has completed audits for many years, ELT CPA LLC can help you navigate New Mexico’s nonprofit reporting requirements with confidence.

Frequently Asked Questions

Does New Mexico use revenue, contributions, or expenses?

New Mexico currently bases the statutory audit threshold on total expenses. For fiscal periods beginning on or after January 1, 2024, the prior total-revenue test was replaced with a total-expense test. (2023 N.M. Laws, ch. 43; NMSA 1978 § 57-22-6(C))

What types of expenses count toward the threshold?

The statute refers to total expenses. In practice, that generally means expenses reported for the fiscal period, such as program, administrative, fundraising, payroll, occupancy, professional-service, and other operating expenses. Organizations should use their actual financial reporting records when evaluating the threshold.

Who regulates charitable organizations in New Mexico?

The New Mexico Department of Justice Charities Unit administers charitable registrations and annual financial reporting requirements under the Charitable Solicitations Act. (New Mexico DOJ, Consumer Affairs – Charities)

When should we begin preparing for an audit?

Organizations approaching $750,000 in annual expenditures should engage an independent CPA well before fiscal year-end to allow sufficient time for planning and fieldwork.