Fleming, who has stood down as Otago coach after two seasons, does not think there is enough local talent to be competitive.
He was also worried that if too many young players were picked, their confidence could be seriously harmed.
Fleming said he picked players from outside the province during his tenure because the young players in the region were not up to national standards. It would have been unfair to throw them in at the deep end.
Chairman Dave Lamont said the situation was not ideal but Otago United did not have the funding to pay players from outside the region.
"You do not survive in the national league with a bunch of schoolboys and we would prefer not to be in this situation, but that is the way it is," Lamont said yesterday.
He agreed with Fleming's concerns but the Otago board had to "tighten its belt".
The United board met last night to discuss the appointment of a coach. Lamont confirmed the job had been offered to Fleming but he had turned it down.
Fleming said he would like to be the Otago coach but there were other factors he had to consider.
If Otago wanted to be in a better financial position, it needed businesspeople on the board and needed to be run like a business.
"I am not saying I will never coach Otago again, but things needed to change. I would have taken the job a week ago if I thought it would."
Lamont said it was disappointing to lose a coach of Fleming's calibre but he respected his decision.
There has been speculation former All White Mike McGarry, the Mosgiel coach, will be appointed to the top job but McGarry appeared to rule himself out when approached for comment.
"I do not know anything about it and I have had no contact with Otago United," he said.
