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Photo: Alexi Rosenfeld via Getty Images

A COVID emergency relief program improperly paid $4.5 billion to self-employed people — a reflection of the Small Business Administration's (SBA) inability to detect fraud, SBA Inspector General Hannibal Ware wrote in a report released Thursday.

Why it matters: SBA has already faced criticism for issues with fraud in its Paycheck Protection Program.

Details: The findings show that the SBA, which has been at the forefront of the government's pandemic response, failed to take steps to identify applications with "flawed or illogical information," Ware said.

  • Its $20 billion Economic Injury Disaster Loan Advance program gave small businesses immediate grants of up to $10,000 in the months after the outbreak.
  • Sole proprietors and independent contractors who only employed themselves were supposed to collect only a maximum grant of $1,000, but over 700,000 managed to get larger grants by claiming additional workers.
  • It turns out the SBA did not require sole proprietors claiming employees to enter their Employer Identification Number. They instead used their Social Security numbers.

Worth noting: Some of the claims were clearly implausible. Hundreds of applicants claimed they employed over 500 workers, but that would typically make them ineligible to apply for the program.

  • Fifteen applications claimed they had a million workers.
  • But the SBA "never requested additional information from these sole proprietors to verify the number of employees cited on their grant applications before approving and disbursing the grants," Ware wrote.

What to watch: Ware said the government should try to reclaim the $4.5 billion it overpaid by requesting reimbursement from applicants unable to prove their claims of employees.

  • Suspected fraudulent cases should be referred to the inspector general's criminal investigation division, he added.

Go deeper: Scammers have stolen over $130 million in coronavirus-related schemes

Go deeper

First person charged with COVID relief loan fraud sentenced to prison

Photo Illustration of U.S currency. Photo by Igor Golovniov/SOPA Images/LightRocket via Getty Images

The first person charged with fraudulently seeking pandemic relief loans was sentenced to 56 months in federal prison on Thursday, according to the Justice Department.

Why it matters: The DOJ has increasingly cracked down on fraud stemming from the Paycheck Protection Program. Over 500 people have been charged with pandemic loan fraud, per Reuters.

31 mins ago - World

Biden's ambassador nominee: "China is not an Olympian power"

Nick Burns testifying before the Senate Foreign Relations Committee. Photo: Sarah Silbiger/Bloomberg via Getty Images

President Biden's nominee to serve as ambassador to China delivered a stark assessment of the challenges the U.S. faces in confronting Beijing, but stressed that the rising superpower is "not all-powerful" and the West retains "substantial" advantages.

The big picture: Nicholas Burns, a retired career diplomat and former U.S. ambassador to NATO, used his confirmation hearing Wednesday to echo the growing bipartisan consensus that China poses "the greatest threat to the security of our country and the democratic world" in the 21st century.

Scoop: U.S. and Israel to form team to solve consulate dispute

Secretary of State Antony Blinken (left) and Israeli Foreign Minister Yair Lapid (right) meet in Washington. Photo: Andrew Harnik/Pool/AFP via Getty Images

The U.S. and Israel are planning to form a joint team to hold discreet negotiations on the reopening of the U.S. Consulate in Jerusalem, Israeli officials say.

Why it matters: The consulate handled relations with the Palestinians for 25 years before being shut down by then President Donald Trump in 2019. Senior officials in Israeli Prime Minister Naftali Bennett's government see the consulate issue as a political hot potato that could destabilize their unwieldy coalition.