LAW No. 7,363/2024 ESTABLISHING THE CONTROL, TRANSPARENCY AND ACCOUNTABILITY OF NON-PROFIT ORGANIZATIONS (NPOs)

On November 15, 2024, the President of the Republic, Santiago Peña, enacted Law No. 7363/2024 "Establishing the control, transparency and accountability of Non-Profit Organizations (NPOs)", which represents a major step forward towards greater regulation and supervision of organizations operating in the country for social, cultural or public interest purposes.

SCOPE.

The purpose and scope of this law can be found in arts. 1 and 3 of the aforementioned norm, which mention that a control, transparency and accountability regime will be established for NPOs that manage public and private funds, national or international, and that influence public policies, government programs, or the activity of the Powers of the State. In this way, it seeks to guarantee responsibility and the proper use of resources in activities of social interest, avoiding improper use or lack of transparency.

EXCLUSIONS.

Certain types of organizations are explicitly excluded from this law, such as political parties, churches and international organizations, which may seem reasonable, since these entities are subject to other forms of regulation or have their own regulatory framework.

ACCESSIBILITY.

The law establishes the creation of a public and accessible Register of NPOs at the Ministry of Economy and Finance. Being accessible online, the information can be easily consulted by any citizen, thus promoting transparency.

THE DUTY OF REGISTRATION.

All nonprofit organizations are required to register. Registration is mandatory for all entities that meet the established criteria, including foreign organizations operating in Paraguay, which would help prevent the financing of uncontrolled activities. In addition, national organizations are required to adopt an appropriate legal form if they do not have one, which ensures that all entities are formally constituted under Paraguayan law. Failure to comply with this provision carries sanctions, which may range from a written warning to suspension of activities for a period of up to six months.

SANCTIONS.

The fact that sanctions are graduated and take into account the seriousness of the infringement and the recurrence of the offence shows a balanced approach, allowing organisations to correct their mistakes before being severely sanctioned. In addition, by applying these sanctions to both organisations and responsible persons (directors and managers), the aim is to ensure that there is true personal responsibility for the management of resources.

DISQUALIFICATION.

An important implication is the disqualification of up to five years for repeat offenders, which could have a significant impact on those involved in the management of NPOs, underlining the importance of compliance and the legal consequences of non-compliance.

MINISTRY OF ECONOMY AND FINANCE, AND ITS AUDITING CHARACTER.

The law grants broad powers to the Ministry of Economy and Finance to request information and verify compliance with obligations, and establishes that state agencies may not sign agreements with organizations that are not registered.

NPOs must submit an annual report to the Ministry of Economy and Finance, detailing their activities, resources and results. This requires them to keep detailed control of the funds they receive and the activities they carry out.

Accountability is annual and publication is semi-annual. The information on their websites about purposes, programs and beneficiaries is essential to ensure transparency and access to public information, which reduces the risk of misappropriation of funds and allows citizens to verify the real impact of the organizations.

This measure reinforces the idea that NPOs that receive public funds must be fully regulated and registered. The rule seeks to protect state resources from being mismanaged by non-formalized entities. In addition, the possibility for the enforcement authority to request information would strengthen control and supervision.

IMPLEMENTATION AND ITS EXPECTATIONS.

Although compliance with these obligations may represent an administrative burden for NPOs, especially for smaller ones, it will be key that the regulations and implementation of the law take into account the capacity of organizations to comply with these requirements without preventing them from carrying out their activities.

This law also establishes that other control institutions, such as the Secretariat for the Prevention of Money Laundering, will continue to be competent, which is important to ensure that NPOs are not used for illicit purposes, such as money laundering or terrorist financing.