USAID's Office of Transition Initiatives (OTI) is part of the Agency's Bureau for Democracy, Conflict and Humanitarian Assistance (DCHA). Unlike its counterparts at USAID, its mission is neither humanitarian nor development-oriented. OTI's activities are overtly political, based on the idea that in the midst of political crisis and instability abroad there are local agents of change whose efforts, when supported by timely and creative U.S. assistance, can tip the balance toward peaceful and democratic outcomes that advance U.S. foreign policy objectives. OTI has initiated or supported a broad range of activities, for which the common theme may be improving public attitudes towards democratic reform. It carries out these activities with a speed and flexibility that is unique among U.S. civilian foreign assistance programs. It is not always clear, however, where OTI fits in an expanding range of foreign assistance programs focused on countries and regions in crisis. The Administration's FY2010 budget proposal, which requests a 150% increase in the OTI account to support a Rapid Response Fund, as well as significant increases for the Civilian Stabilization Initiative at the State Department, does little to clarify OTI's role or niche functions. This report discusses OTI's origin, its past and present activities, and issues about the program's impact, structure, and role within USAID that may be of interest to Congress. OTI began as a proposal for an Office of Crisis and Transition Management sent to Congress from incoming USAID Administrator Brian Atwood in August 1993, reportedly in response to outgoing Secretary of State Lawrence Eagleburger's advice that USAID should find ways to address key foreign policy priorities more quickly if the agency was to remain relevant. Atwood proposed to bridge the gap between emergency disaster relief programs and long-term development assistance with a small staff provided with core funding and special crisis waiver authority. Anticipated activities of this office included reintegrating demobilized combatants, restoring basic infrastructure, preparing for elections, building public institutions, and supporting demining and police training activities. Congress responded to the Atwood proposal in the FY1994 Foreign Operations Appropriations Act ( P.L. 103-87 ) by expanding the authorization of the existing Office of U.S. Foreign Disaster Assistance (OFDA) to include reconstruction activities. OTI activities were supported through the OFDA account until the OTI budget line item was created by congressional appropriators in the FY2001 Foreign Operation Appropriations Act ( P.L. 106-429 ), with the following language, which has been mirrored in subsequent Foreign Operations appropriations legislation: TRANSITION INITIATIVES. For necessary expenses for international disaster rehabilitation and reconstruction assistance pursuant to section 491 of the Foreign Assistance Act of 1961, $50,000,000, to remain available until expended, to support transition to democracy and to long-term development of countries in crisis: Provided, That such support may include assistance to develop, strengthen, or preserve democratic institutions and processes, revitalize basic infrastructure, and foster the peaceful resolution of conflict. OTI exists under the authority of Section 491 of the Foreign Assistance Act of 1961, which allows Transition Initiative funds to be used notwithstanding any other provision of law. This allows almost complete executive discretion in responding to foreign disasters. Meanwhile, the appropriations language establishing the new budget account expanded the scope of OTI activities far beyond traditional disaster assistance carried out by OFDA. Statutory language inserted into annual appropriations legislation requires that the House and Senate appropriations committees be given five days notice before starting new programs, which is essentially the only formal requirement for congressional notification of OTI activities. Congress has also clarified that OTI is not precluded from using resources transferred from other development and economic assistance funds. Together with the notwithstanding provision of Section 491, these annual appropriations provisions allow OTI to pursue a wide range of activities without having to meet certain administrative requirements, particularly related to contracting and procurement. Since beginning its first projects in Angola and Haiti in 1994, OTI has worked in 36 countries and territories. With its goal of engaging with countries that are ripe for social and political change, OTI chooses where to engage based on an assessment of (1) U.S. national interests, (2) the presence of a window of opportunity, (3) the assessed ability to positively influence a successful transition to peace and democracy, and (4) the stability of the operating environment. For example, Angola, the first country where OTI operated, was selected in 1994 for several reasons: its oil and other natural resources represented a security and commercial interest to the United States; a peace process was underway; and there was evidence that significant gains could be made through targeted programs related to land mine awareness, demining, and reintegration of ex-combatants. In Haiti, also selected for OTI involvement in 1994, the United States had an interest in preventing long-term dependence on humanitarian assistance and chaotic immigration flows to the United States. In addition, the arrival of multinational forces and the return of President Jean-Bertrand Aristide created the necessary security and hope for change, and a survey indicated strong support among Haitians for the reestablishment of community life. In contrast, OTI monitored but never intervened that year in Liberia, where it was determined that the Liberian leadership did not have the necessary political will to make a positive transition. A USAID Inspector General's survey of OTI, however, found that OTI planning documents often do not reflect specific consideration of each criteria for engagement during pre-program assessments. Given its limited resources, OTI does not operate in every country that meets the four-pronged criteria, and the OTI Director has authority to determine where OTI is to be active. As previously mentioned, however, Congress must be notified five days in advance of OTI activity in a new country, and the Director of Foreign Assistance at the Department of State clears the report to Congress. In practice, OTI officials report consulting heavily with State and USAID leaders when developing new programs, but this consultation does not necessarily imply coordination. Figure 1 highlights the locations of OTI's current and past reported activities. Table 1 and Figure 2 show funding levels of both the TI account and other funds obligated by OTI beginning in FY2001, when the TI budget line item was created. As Table 1 demonstrates, Transition Initiative account funding has remained steady from 1994 to 2008, in the $40 million to $60 million range, with large increases coming through transfers. The sharp increase in OTI obligations in FY2004 and FY2005 can be attributed almost entirely to activities in Iraq funded under the Iraq Relief and Reconstruction Fund. For FY2010, the Obama Administration has proposed $126 million for the TI account, a 150% increase over the estimated FY2009 funding level. It is unclear whether this reflects an intent to increase OTI activity or to reduce reliance on transferred funds. Although OTI manages funds from a variety of accounts, transferred funds carry with them the restrictions under which they are authorized. In other words, while funds appropriated through the Transition Initiatives account can be used according to disaster assistance rules, ESF, IRRF, DA, or other account funds transferred to OTI must be managed by OTI in accordance with the restrictions under which those accounts are authorized. Therefore, the program's ability to act rapidly and flexibly, OTI notes, is not simply a function of its less restrictive authorization—since a large part of the funds are restricted—but rather reflects OTI's organizational culture and operational practices. OTI programs are customized to country needs, frequently revised, and often designed to fill gaps in a larger U.S and global foreign assistance effort. As such, they do not fit into neat categories. A review of OTI annual reports shows that OTI activities in the 15 years since its inception reflect both the original intent of Congress as well as needs that may not have been anticipated in 1993. OTI has supported many projects to reintegrate former combatants into civil society, often through job-creation programs, but it has also brought ultra high-speed Internet access to remote parts of Bolivia, for example, in an effort to enhance rural development and reduce destabilizing urban migration. Many OTI projects support independent media, both to bring information to marginalized communities and to promote the message and enhance the credibility of new democratic governments. OTI democracy promotion activities focus on support for citizen-government interaction and confidence building, often in the form of sponsoring workshops and town hall meetings, funding public opinion polls, and providing basic office equipment for both governmental and non-governmental organizations. Most OTI grants are small, ranging from $5,000 to $50,000, but OTI country representatives have the authority to approve grants of up to $100,000. Larger grants may be approved in the Washington office. Programs are intended to last two to three years, but have extended well beyond that time frame in a few instances, such as Sudan and Venezuela. Table 2 summarizes current OTI activities. OTI has been described by some who have worked with the organization as representing what USAID as an agency should be, in the sense that OTI programs are flexible and, in the words of one development professional, "address the most important issues." The comparison may not be fair, however, as USAID's development mission, with its long-term focus on improving standards of living, is quite different from OTI's short-term political objectives. Furthermore, the rapid response valued by some partners in the field may come at the expense of transparency and accountability valued by Congress and the American public. OTI was intended in part to be a laboratory within USAID to try innovative approaches to development, and there may be a range of lessons to be learned from the program, both positive and negative.