Estonian State Audit Office: Defence Ministry still cannot verify €1.2bn in property records

For the second year running, Estonia's State Audit Office has sharply criticised the Ministry of Defence over disorder in its property records. A year ago the office already warned of accounting problems within the ministry's system; the new audit shows order still has not been restored.

Auditor General Janar Holm told reporters that the composition of the Defence Forces' stockpiles still cannot be precisely established. Although records list assets worth €1.2 billion, auditors were unable to confirm that property of that value actually exists. Holm warned the situation is so confused that a dishonest individual gaining access to the system could cause the state considerable financial damage.

Ministry acknowledges the difficulty

The Defence Ministry says restoring order has proven harder than expected — the Defence Forces alone operate more than a thousand warehouses, and resources for conducting a full inventory have been insufficient. As one possible solution, Holm suggested temporarily transferring property accounting responsibilities from the Defence Forces to the ministry itself.

Defence Ministry Chancellor Kaimo Kuusk called the proposal valuable, noting the ministry had itself asked the State Audit Office not only to criticise but also to suggest solutions. In early September, the Defence Forces and the Estonian Centre for Defence Investments are due to present their own proposals for fixing financial accounting, after which a decision on further steps will be made. If the function is indeed transferred to the ministry, it could happen from next year.

Court dispute over contracts

A separate problem concerns contracts held by the Centre for Defence Investments, which were not provided to the State Audit Office last year. Auditors have now identified budget risks linked to these contracts worth around €70 million. A dispute with a supplier is currently before the courts. Centre head Elmar Vaher explained that the ministry is seeking through the courts to have the weapons and ammunition manufacturer fulfil its contractual obligations, or otherwise repay the advance payment already made, since the ministry itself had met its own obligations.

Holm stressed that taxpayers, who are being asked to devote ever more money to defence — often at the expense of other spending such as teachers' salaries or healthcare — deserve clarity about what is being bought with that money, where it is, and what condition it is in. The ministry has acknowledged that last year's measures were insufficient and that it must now overhaul its entire accounting and control system.