The Potential Correlation Between Organizational Structure and Financial Sustainability in Turkish Local Government: The Case of Mugla Municipalities

Introduction

In Turkey's local governments’ history, it is obvious to see that the Western system of local governments is not too old. Most of the services provided by local governments in the West were carried out by institutions such as artisan organizations and foundations in the Ottoman Empire. After the declaration of the Republic in 1923, a foundation of a monumental structure was laid, and a different structure was made from the Ottoman. Along with the first constitution adopted in 1924, local governments were regarded as a part of the administration. And this was later found in all ongoing constitutional arrangements. Today, within the Turkish Administration system, local administrations are defined as “Public corporate entities established to meet the common local needs of the inhabitants of provinces, municipal districts and villages. Their establishment and structure are determined by law. Decision-making organs of local administrations are elected (by free elections, secret ballot, universal suffrage) as described in law. The formation, duties and powers of the local administrations shall be regulated by law in accordance with the principle of local administration. The formation of local administrative bodies into a union with the permission of the Council of Ministers for the purpose of performing specific public services; and the functions, powers, financial and security arrangements of these unions, and their reciprocal ties and relations with the central administration, shall be regulated by law.”

When one focuses on this definition, it can be said that the transfer and sharing of authority between the central government and the local governments constitutes the backbone of the Turkish Local Government system. Studies in the literature have also shown that resource sharing between local governments and central government is the most important issue of public financial systems (Yılmaz, Emil, & Kerimoğlu, 2012, p. 37) Article 127 of the Constitution is also worthy of the importance of this issue. According to this; local administrations should be allocated financial resources in proportion to their functions. But despite this provision of the Constitution, the most important problem that local governments face today is that there is no effective model for allocating national resources among governments (Kerimoğlu & Yılmaz, 2005).

Throughout the membership process of the European Union, Turkey has undergone various transformations in this sense. For this reason, the financial and public transformation experienced by Turkey in the Europeanization process must be evaluated. Localization, financial localization and financial sustainability in local governments are one of the reflections of this transformation. Despite being a non-profit structure, financial sustainability seems to be extremely important in terms of local government units. Financial and economic crises, especially those at global level, have highlighted the need to address financial sustainability in non-profit-bodies.

As stated by Bolivar et al. (2014), International Financial Reporting Standards (IFRSs), as well as international professional organizations, underline the need to understand the current state of public finances in order to ensure long-term management of financial sustainability. Similarly, Izquierdo & Panizza (2003) defines financial sustainability as the ability of an individual country to meet budget constraints. Financial sustainability requires a balance between increased cost pressures and limited resources (Thomson, Figueras, Kutzin, & Permanand, 2009, p. 2).