Palm blames Pevkur and Kuusk for defence accounting failures

Reserve Major General Veiko-Vello Palm blamed then-Defence Minister Hanno Pevkur and Chancellor Kaimo Kuusk for confusion over defence accounting during ERR’s ETV programme Impulss. Pevkur said the Defence Forces had failed to implement the accounting rules.

Palm said that although he had previously held a senior position in the Defence Forces, he had spent the past two years in the private sector. He is a board member of Frankenburg Technologies, whose other board member is Kusti Salm. Palm is also connected to Wolfram Europe, whose chief executive is Magnus-Valdemar Saar and whose other key manager is Katri Raudsepp, the interim director of the State Defence Investment Centre.

Palm said Pevkur was partly correct in saying the problems had already existed when Palm was deputy commander of the Defence Forces.

“The National Audit Office has correctly pointed to the shortcomings. They must be fixed, and these shortcomings are scandalous. At the same time, I must say that the state’s chief accountant, so to speak, changed the rules in the middle of the game,” Palm said.

He said that around 2021, the rules were changed so that state accounting requirements previously applied to the Defence Forces only for certain items, such as fixed assets, or the largest items. The requirements were then extended to all items.

Palm said the Defence Forces had already been moving significantly faster and more successfully to correct the shortcomings when he was deputy commander.

“When all the remaining items were added, the Defence Forces, which had been recording its stocks according to one logic and in one system, had to start doing so in another way. Whether that is right or wrong is not worth debating. It has to do it because the state wants it,” Palm said.

He said it was unacceptable and incomprehensible that the system had not been fixed in two years. Palm suggested hiring experts or auditors to put the Defence Forces’ accounting in order.

“Leadership still begins at the very top. The role of the defence minister is not to go around counting things in warehouses. Hanno Pevkur is entirely right that this is not his role. But he must create the necessary systems,” Palm said.

He questioned why the decision to change the rules had been made without thorough consultation with the defence sector, saying it had imposed a significant burden on it, possibly unfairly. He also criticised the failure to establish mechanisms for implementing the change.

“We cannot simply accept people coming on air and saying that we now have to shut down the Defence Forces for several months to go and count things in a warehouse. That is absurd,” Palm said.

Holm: Problems would have emerged anyway

National Auditor General Janar Holm said the proposal to change the accounting rules had come from the National Audit Office and that the change had also been decided by the finance minister.

“The state’s chief accountant has done very good work. The rule change brought this problem to light. The problem would have emerged somewhere anyway,” Holm said.

He agreed that the change may have come too suddenly and should have been prepared and discussed more thoroughly. However, he said it was a reasonable step because all other organisations in Estonia record their stocks in the same way.