Transparency and reporting obligations for Third Sector Entities (ETS): updates from Law 104/2024

In recent years, the Third Sector has undergone major regulatory changes aimed at strengthening transparency and simplifying the management of non-profit entities.

The Third Sector Code introduced specific obligations concerning financial reporting and the disclosure of information, with the aim of safeguarding the trust of donors, citizens, and institutions.

Complementing and modifying these provisions is Law No. 104/2024, which brought important changes, especially regarding financial statements, cash-based reporting, and internal controls.

But what are the current transparency obligations for Third Sector Entities (ETS)? What are the new requirements under Law 104/2024? In this article, we analyze what has changed for associations, foundations, and other ETS, focusing on the benefits and necessary compliance for operating within the law.

Transparency in the Third Sector: a fundamental principle

Transparency is a key value for ETS, as it ensures the proper use of resources and strengthens trust from donors, funders, and public institutions.

Since ETS operate thanks to donations, public contributions, grants, and private funding, they bear a strong responsibility toward those who provide support. For this reason, the law requires reporting and transparency obligations, with the goals of:

• ensuring that raised funds are used properly;
• facilitating access to public and private contributions;
• preventing abuse and mismanagement through stricter controls;
• making ETS more competitive, allowing them to participate in public tenders and agreements.

Transparency is therefore not only about accountability, but also a strategic tool that enables ETS to operate efficiently and sustainably, enhancing their credibility and attractiveness.

Accordingly, ETS must comply with specific transparency obligations, which vary depending on the organization’s size and activity type. In general, all ETS must publish, both on their website and in the National Single Register of the Third Sector (RUNTS), key documents such as the statute and articles of incorporation, the list of funding sources (including public funds), compensation for administrators (if exceeding €100,000 per year) and activities carried out and their impact.

Additionally, ETS that receive over €10,000 in public funds annually must publish a detailed report on how those funds were used.

Failure to publish such information may result in administrative penalties and, in serious cases, deregistration from RUNTS, leading to the loss of tax benefits. These obligations are essential to ensure that ETS operate transparently, maintain funder trust, and improve their ability to access vital resources.

Annual financial statement: what changes with Law 104/2024?

Reporting is one of the main obligations for ETS and is necessary to ensure transparency and proper resource management. Every year, ETS must prepare a financial statement that clearly shows their income, expenses, and activities. The reporting method depends on the organization’s size and transaction volume.

All ETS, regardless of size, are required to draw up an annual report. This is not just a formality—it demonstrates transparency, monitors economic sustainability, and ensures that funds are used to pursue the social and solidarity goals outlined in the statute.

Before Law 104/2024 came into effect, ETS with annual revenues under €220,000 could use cash-based accounting, a simplified method that records only actual income and expenses. The new law raises this threshold to €300,000, allowing more entities to use this simplified reporting.

While less detailed than a full financial statement, cash-based reporting still allows effective monitoring and is especially useful for smaller ETS lacking the resources for complex accounting.

ETS with annual revenues over €300,000 must instead prepare a standard financial statement with more detail. This must include fundamental information such as income (broken down by source: donations, public contributions, economic activities, etc.), expenses (categorized by type), assets, their origins, and how they were used.

ETS earning over €1 million per year must also prepare a social report, a document that goes beyond numbers to describe the social impact of their activities and outcomes achieved relative to goals. It also includes qualitative assessments of how the entity contributes to community well-being and social development.

Following the reform, the deadline to submit the financial statement is 180 days after the end of the fiscal year. This extension offers significant benefits, allowing ETS to better organize resources and reduce errors, ensuring more accurate and reliable information.

New rules for ETS oversight

Law 104/2024 updated the monitoring and auditing system for ETS to ensure greater transparency and proportionality in reporting obligations. The goal is to avoid excessive administrative burdens for smaller entities while maintaining strict control over larger or more economically significant ones.

Under the new law, an internal control body must be appointed if, for two consecutive years, an ETS exceeds at least two of the following thresholds:

• total assets exceeding €1,100,000;
• income, earnings, or revenue over €2,200,000;
• average number of employees exceeding 50.

The control body is responsible for verifying management practices and ensuring that economic and financial activities comply with the law and the statute. Specifically, it must:

• monitor accounting and proper recordkeeping;
• verify compliance with transparency and reporting obligations;
• assess the economic sustainability of the organization and report irregularities.

Statutory auditing must be carried out by a registered professional (e.g., a certified public accountant or auditing firm).

Regarding ETS with legal personality:

• if their revenue is below €60,000 annually, they may use cash-based reporting instead of a standard financial statement;
• this simplification significantly reduces bureaucracy, allowing smaller entities to focus on social activities rather than administrative management.

This added flexibility supports a broader legal framework designed to simplify ETS operations while maintaining high standards of transparency and oversight.

What happens if ETS fail to comply with transparency obligations?

Transparency and proper reporting are essential to maintaining the trust of citizens, donors, and institutions. Non-compliance can damage an organization’s credibility and lead to serious legal, financial, and operational consequences.

ETS that violate transparency obligations may face fines and administrative penalties ranging from €500 to €20,000.

If an entity consistently fails to meet transparency and reporting requirements or commits serious violations, the Ministry of Labour and Social Policies or regional RUNTS offices may initiate deregistration procedures.

Once deregistered, the entity loses all benefits associated with ETS status, including tax breaks and funding access. It will no longer be eligible for public grants or agreements reserved for Third Sector organizations and may lose existing contracts with public bodies.

Furthermore, ETS depend on the trust of citizens, volunteers, donors, and institutions. If an entity is flagged for a lack of transparency or poor resource management, it could suffer severe reputational damage.

Transparency is a resource, not a burden

The new provisions of Law 104/2024 offer more flexibility in reporting, ensuring:

• greater proportionality in obligations, avoiding excessive burdens on smaller entities;
• stronger protection for larger ETS, through stricter auditing requirements.

However, transparency remains a fundamental requirement to access funding, benefit from tax incentives, and maintain community trust.

ETS that fail to comply risk not only sanctions and financial losses, but also serious reputational harm, which could jeopardize their long-term operations.

For these reasons, complying with transparency and reporting obligations should not be seen as a bureaucratic burden, but rather as an investment in the organization’s credibility and sustainability.