The office adds that irregularities included a lack of clarity on loan application rejections and their reasons, and a lack of consistency on requirements to prove rejection from commercial banks prior to redressing to the state credit agency, KredEx.

KredEx is one of two such bodies recently to come under audit office scrutiny, the other being the Rural Development Foundation (MES), with both agencies' activities during the pandemic being particularly of concern for the audit office, though it stopped short of pronouncing any major wrong-doing in connection with KredEx.

Auditor General Janar Holm said: "Unfortunately, the level of detail of the analyses accepted by Kredex varied, although socio-economic impact analysis is the tool that best helps assess the national importance of a project."

One loan which attracted criticism at the time it was made last year, for a sum of of close to €40 million, went to an unfinished Tallinn real estate development, which by its nature was not generating revenue and so, it was argued, could not obviously have been said to have been hit hard by the pandemic, nor could it easily have been termed a project of "national importance" – both major criteria in issuing the loans.

Once an internal investigation into the project, called Porto Franco, became public, and with it news that the ruling Center Party was implicated, Jüri Ratas (Center) resigned as prime minister, taking the Center/EKRE/Isamaa coalition with him.

Janar Holm continued that: "As some enterprises started collecting banks' assessments only after the application was submitted, it seems that this precondition became more of a formality," in relation to documentation required, or not required, during the loan application process.

While loans was generally secured by a mortgage, one, to aircraft servicing firm Magnetic MRO loan, for €10 million, was instead secured by a commercial pledge on the enterprise's assets, plus a guarantee from the parent company.

Nordica's €8-million loan was secured solely by a commercial pledge.

The National Audit Office noted that Kredex experts themselves have assessed the risk level of a commercial pledge as "high."

Through 2020, a total of 15 KredEx loan applications from 13 enterprises and totaling €538 million were received in respect of "nationally important" projects. The applications were processed by the Kredex foundation, while the government defined whether a project was of national importance or not.

The major beneficiaries, apart from Port Franco, Nordica and Magnetic MRO as noted, were shipping line Tallink (€100 million) and fuel retailer Alexela (€51 million).

A project from Sinrob OÜ, totaling €14 million, was also approved, though this is due to be issued later on this year, BNS reports. Sinrob OÜ had a share capital of around €2,500 and was founded four years ago.

The National Audit Office analyzed the application procedure at the KredEx level and assessed whether the organization of work helped ensure equal treatment of applicants and transparency of the procedure.

The National Audit Office did not analyze what could have influenced decisions beyond the realm of Kredex.

In the case of both Porto Franco and Nordica, BNS reports, no consensus was found at KredEx, on the issue of eligibility in the first case, and risk in the second, yet both were approved by the agency's supervisory board.

At the same time, and at a time when loan measure terms were changed multiple times while the pandemic went on, applications submitted under the same conditions were broadly treated the same, the office said.

Non-compliance with the conditions' measures led to Kredex rejecting the applications of four enterprises, to the tune of €112 million.

Irregularities included companies proving their non-receipt of loans from banks - one of the important preconditions for getting a Kredex loan - in a variety of different ways, for instance with Alexela submitting negative decisions received from five banks compared with Nordica's one, BNS reports.

The National Audit Office says it finds that in the interests of transparency of proceedings, the principles of administrative procedure must be complied with when allocating public funds. This means that refusals to lend need to be explained in detail.

Irregularities were also observed in rejection of loan applications, with email sometimes the sole means of communication and proper documentation lacking, which would both have explained the rejection and provided an opportunity to challenge the decision.

The loan measure for nationally important projects was one of the measures initiated by the government in the spring of 2020 to mitigate the economic impacts of the coronavirus pandemic.

The measure had a budget of €265 million, and ended at the end of the year, i.e. December 2020.

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