Since 1979, when the Israel-Egypt peace treaty was signed, Egypt has been among the top recipients of U.S. bilateral assistance in the world. In the more than 30 years since the signing of the treaty, Egypt has been a key strategic partner of the United States in the Middle East. In fiscal years 2009 through 2014, the U.S. government allocated an average of approximately $1.5 billion annually in assistance for Egypt. The U.S. government provided the majority of this assistance to the Egyptian military through the Foreign Military Financing program, with annual allocations of approximately $1.3 billion during this period. The U.S. government also provided economic assistance to Egypt in fiscal years 2009 through 2014 that funded a range of economic development, health, education, and democracy and governance projects. The U.S. government funded the majority of its economic assistance to Egypt through the Economic Support Fund (ESF) account, with $200 million to $250 million allocated annually to Egypt during this period. Egypt’s progress toward greater democratization has been a longstanding objective of the U.S. government, but it became a greater priority after the January 2011 revolution. While the U.S. government has funded democracy and governance activities in Egypt for more than 10 years, some of which was through agreements with the Egyptian government, the United States increased its direct funding to NGOs for such activities after the 2011 revolution. USAID; State’s Bureau of Democracy, Human Rights, and Labor (DRL); and State’s Middle East Partnership Initiative (MEPI) all fund democracy and governance programming in Egypt. Generally, USAID funds its democracy and governance activities in Egypt with ESF funds, DRL uses funding from the Human Rights and Democracy Fund, and MEPI funds its activities with regional ESF funds. In total, USAID has awarded approximately $108 million between fiscal year 2009 and March 31, 2014, for democracy and governance assistance in Egypt, and State has awarded approximately $32 million for democracy and governance assistance in fiscal year 2009 through March 31, 2014. In February 2011, shortly after the revolution, USAID and State reprogrammed $50 million in prior year ESF funds and allocated an additional $15 million in democracy funding to provide additional democracy and governance assistance to support Egypt’s political transition. It awarded all of this funding directly to NGOs and other organizations to fund a variety of activities including political party strengthening, election monitoring, and independent media development. In 2004, the U.S. government began discussions with the Egyptian government regarding a program to directly fund NGOs and other organizations to implement democracy and governance activities in Egypt outside of the framework of an implementing assistance agreement. From September to November 2004, the two governments worked to outline a process by which the United States would directly fund such activities. Further information on this process can be found in the sensitive version of our report. Shortly thereafter, Congress approved an amendment to the Consolidated Appropriations Act of 2005 (the Brownback Amendment), which provided further direction regarding assistance for democracy and governance activities in Egypt. The Brownback Amendment stated, “That with respect to the provision of assistance for Egypt for democracy and governance activities, the organizations implementing such assistance and the specific nature of that assistance shall not be subject to the prior approval by the Government of Egypt.” In fiscal year 2005, USAID began using some democracy and governance assistance to directly fund NGOs and other types of organizations to implement democracy and governance activities, rather than working with the Egyptian government under the implementing assistance agreement. Soon after USAID started to directly fund NGOs and other types of organizations to implement democracy and governance activities in fiscal year 2005, the Egyptian government raised objections. Among other things, the Egyptian government stated that USAID was violating the terms of the process that the two governments had outlined in a 2004 exchange of letters. However, the U.S. government officials responded that they were interpreting their commitments based upon the conditions applied by the Brownback Amendment and agreement in diplomatic discussions on direct funding to NGOs. According to State officials, DRL and MEPI have never funded any democracy and governance activities in Egypt under an implementing assistance agreement and have always funded their activities directly. Egypt’s Law 84, which was passed in 2002, governs the activities of foreign and Egyptian NGOs, according to documents we reviewed. Among other things, the law establishes requirements for NGOs to register with the Egyptian government before beginning operations, according to documents we reviewed. According to Egyptian government officials, Egyptian NGOs are required to obtain their registration from the Ministry of Social Solidarity, while foreign NGOs must first complete a standing agreement with the Ministry of Foreign Affairs and then register with the Ministry of Social Solidarity. Egyptian NGOs must also obtain approval from the Ministry of Social Solidarity to receive funding from foreign sources, according to Egyptian government officials. U.S. government and NGO officials and documents noted that Law 84 establishes registration requirements for NGOs, but also asserted that there are significant ambiguities in the law and that it is sometimes inconsistently applied by Egyptian government officials. U.S. government and NGO officials stated that these issues complicate NGOs’ attempts to register and obtain approval to receive foreign funding. For example, although USAID understands that Law 84 contains a provision that allows for automatic registration if an NGO does not hear back from the Egyptian government in 60 days after submitting its application, USAID noted that there is significant ambiguity over how this provision is applied, including whether or not it applies to foreign NGOs. According to a senior official from Egypt’s Ministry of Social Solidarity, the 60-day time frame applies only to Egyptian NGOs. In addition, State reported in its Egypt Report on Human Rights Practices for 2011 that the Egyptian government generally allowed unregistered NGOs to operate, but that such NGOs operated in violation of the law and faced the risk of government harassment and interference, or closure. The Egyptian government strongly objected to some of the U.S. government’s planned assistance for democracy and governance after the January 2011 revolution, including the award of funding to unregistered NGOs. These concerns led to the Egyptian Ministry of Justice questioning officials from several NGOs about their activities in late 2011. Subsequently, in December 2011, the Egyptian police raided the offices of four U.S. NGOs that were implementing U.S.-funded democracy and governance activities—Freedom House, ICFJ, IRI, and NDI. In February 2012, the Egyptian government charged employees of these four organizations and a German organization, the Konrad Adenauer Foundation, with establishing and operating unauthorized international organizations, according to government documents. At the time of the charges, all four U.S. organizations reported that they had submitted registration applications to the Egyptian government. In June 2013, an Egyptian court convicted a total of 43 employees from the four U.S. NGOs and the Konrad Adenauer Foundation, of these charges and the NGOs had to close their operations in Egypt. Table 1 provides a summary of the grants the U.S. government awarded after the January 2011 revolution to the four U.S. NGOs that were prosecuted. All of the American staff from the NGOs were allowed to leave Egypt before the convictions. Since the January 2011 revolution that ended the almost 30-year rule of Hosni Mubarak, Egypt has continued to undergo a series of political transitions. After a transitional period of military rule following President Mubarak’s resignation, Mohamed Morsi of the Muslim Brotherhood became Egypt’s first democratically elected president in June 2012. However, in July 2013, the Egyptian military removed Morsi from power after widespread protests against his rule. After Morsi’s removal, the military appointed the Chief Justice of Egypt’s Supreme Constitutional Court, Adli Monsour, to serve as interim president. Former Field Marshal Abdelfattah al-Sisi was subsequently elected as president in May 2014. Figure 1 provides a timeline of key events in Egypt’s political transition and the NGO trial. Consistent with their agencies’ policies and internal control standards, State and USAID identified potential risks as far back as 2005 with directly funding democracy and governance assistance in Egypt, but noted that it was difficult to assess the extent and specific nature of these risks in the aftermath of the revolution, given the significant political changes that had just taken place. Also consistent with their agencies’ policies and internal control standards, State and USAID have taken some steps as far back as 2005 to plan for managing the risks of providing democratic and governance assistance, but they have not taken steps to incorporate lessons learned from the events leading up to and including the prosecution of U.S.-funded NGOs in Egypt into their risk management plans. We have previously reported on the importance of lessons learned in planning agencies’ activities. Consistent with its policies, as well as internal control standards, the U.S. government identified potential risks in providing democracy and governance assistance in Egypt. Both State’s Foreign Affairs Manual and USAID’s Automated Directives System emphasize the need for program managers to identify and assess potential risks to their programs. State and USAID’s requirements reflect and incorporate the Standards for Internal Control in the Federal Government, which states that internal control should provide for an assessment of the risks the agency faces from both external and internal sources. These internal control standards note that agency managers need to comprehensively identify risks and should consider all significant interactions between the agency and other parties. The U.S. government has identified potential risks in implementing its democracy and governance assistance in Egypt since it began directly funding organizations, including unregistered NGOs, in 2005. U.S. officials and documentation noted that such assistance has been an ongoing source of tension with the Egyptian government since then.