The Chronicle of Philanthropy (January 20, 2005) reported that many nonprofit observers believe that charities and foundations could face an unusually hostile political and financial climate in Washington that could lead to significant changes in the nonprofit sector.  Among the increased government scutiny:

• the IRS has stepped up its efforts to monitor nonprofit organizations;
• members of Congress are conducting a comprehensive review of potential legal abuses by charities and foundations;
• a House committee that oversees nonprofit groups plans to hold hearings in 2005;
• key senators are expected to introduce a bill in 2005 to toughen regulations governing charities.

Even more concerning to some advocates of the nonprofit sector are the effects of the current budget crisis.  The huge deficit, together with the President’s promise to extend tax cuts, may result in a sharp cut in the federal budget.  Moreover, because the three biggest areas of government spending – defense and security, Social Security and Medicate – are not likely to receive less money, cuts are more likely to be made in areas such as Medicaid, welfare and government subsidies to charities and the groups they serve.