Estonia's defence institutions have failed to resolve serious shortcomings in financial and inventory management, increasing the risk of state assets being misused or going unaccounted for, the National Audit Office said on August 28. 

The findings raise concerns over Estonia’s ability to manage soaring defence spending while ensuring military assets are properly controlled and accounted for.

The watchdog issued a qualification over the accuracy of €1.2bn of inventories held by institutions under the Ministry of Defence, saying weaknesses in the Estonian Defence Forces' accounting made it unclear what assets, quantities and values had been recorded.

"Society is making an effort to fund the country's growing defense capabilities, but the audit shows that the Ministry of Defense, the Estonian Defense Forces and the Estonian Center for Defense Investments have not made sufficient efforts in return to resolve the serious problems with the use of funds and the accounting of assets and inventories highlighted in the state's consolidated annual report for the previous fiscal year," auditor general Janar Holm said, according to the National Audit Office statement. 

The audit also questioned a €99.7mn retrospective adjustment to Defence Forces inventories. Following approval of Estonia's 2024 consolidated annual report, the inventory balance was increased from €723.9mn to €823.6mn.

The Defence Forces said the adjustment followed a review of materiel categories, but could not specify which categories had been added or in what quantities. The audit found there was no supporting source document explaining how the adjustment had been calculated.

Ministry of Defence Permanent Secretary Kaimo Kuusk acknowledged that improvements had been insufficient or were taking longer than expected, broadcaster ERR.ee reported. He said inventory procedures had been revised, 10 dedicated inventory posts created and controls over advance payments and asset movements strengthened.

Kuusk nevertheless maintained that defence funding had been used for its intended purpose of strengthening Estonia's defence capabilities.