To require that development assistance may be provided to certain governmental or nongovernmental organizations only if those organizations use that assistance in democratic countries, and for other purposes.

Permits development assistance to be provided to a governmental or nongovernmental organization only if the organization: (1) provides assurances that it will provide assistance only to individuals or organizations located in countries with governments that promote an open political process with free and fair elections, adhere to the rule of law, respect individual rights, and do not engage in human rights violations; (2) has an adequate system of financial auditing and accounting procedures applicable to such assistance; and (3) provides assurances that no more than ten percent of the assistance allocated for any program or activity will be used by a recipient for administrative costs.

Authorizes the President to waive the requirements applicable to governments if he certifies to the Congress that a government is making substantial progress toward meeting the requirements.

Bars development assistance to an organization for a five-year period if the inspector general of the agency primarily responsible for administering development assistance under the Foreign Assistance Act of 1961 determines that the organization has used funds in a manner inconsistent with the purpose for which the funds were provided.