An emergency relief program hastily rolled out in the early days of the pandemic had such poor fraud protections that it improperly doled out nearly $4.5 billion to self-employed people who said they had additional workers — even those who made wildly implausible claims, like having one million employees.
The $20 billion program, called the Economic Injury Disaster Loan Advance, offered small businesses immediate grants of up to $10,000 in the months after the pandemic shuttered much of the economy. But hundreds of thousands of the grants it made were inflated because there was no system to catch applications with “flawed or illogical information,” Hannibal Ware, the Small Business Administration’s inspector general, wrote in a report released on Thursday.
The report, which described how the agency could have spotted obviously bogus applications by taking even rudimentary steps to prevent fraud, was the latest black eye for the S.B.A., a tiny department that was thrust to the front lines of the government’s pandemic response. The agency also ran the Paycheck Protection Program, which gave out $800 billion in bank-issued loans but often left lenders and borrowers scrambling to comply with confusing and shifting rules. Fraud was a problem there, too: Tens of billions of dollars may have been taken improperly.
The loan advance grants were created by Congress in March 2020 as part of its first coronavirus aid package. Intended to quickly get money to devastated…