The federal government has decided to cut funding to First Nations University of Canada.

Indian Affairs and Northern Development Minister Chuck Strahl announced Monday that the department will not continue with about $7 million in annual funding to the university, which has its main campus in Regina, starting in the new fiscal year, April 1.

The cut is being made because FNUC has failed to make progress on "long-standing, systemic problems related to governance and financial management," Strahl said in a news release.

"We need to be accountable and transparent to all Canadians, including First Nations," Strahl said.

The move to cut funding follows a similar decision made by the Saskatchewan government last week.

Saskatchewan Advanced Education Minister Rob Norris said Wednesday the province's $5.2 million annual grant would not continue past April 1.

For the province, the final straw was a late report dealing with how the university would reform its board of governors.

For years, critics have argued that FNUC's board was too large and gave too much power to First Nations chiefs and other politicians.

Norris said there were also questions of financial accountability.

An internal report obtained by CBC News alleged $265,000 in staff vacation pay was paid out as cash and raised concerns about business trips to Las Vegas, Hawaii and Montreal at a time when the university was struggling financially.

With the federal Indian Affairs and provincial grants eliminated, FNUC has lost about half its revenue.

Academics, students shocked

Many people in the academic community said they were shocked.

"It's very, very disappointing," said Penny Stewart, the president of the Canadian Association of University Teachers. "It's a very short-sighted move."

The latest move also stunned students, who are worried about whether or not they will be able to finish their studies.

"It's just a slap in the face to me," Indian fine arts student Adam Martin said, adding that senior administrators deserve much of the blame for what has happened.

"It's just the greatest shame they could allow this to happen."

After the province cut funding last week, the Federation of Saskatchewan Indian Nations, the organization that controls FNUC, dissolved the board of governors and put a number of senior administrators on leave.

FSIN was hoping the government would change its mind about the cuts or, failing that, that Ottawa would backfill the lost provincial money. What happens next is a matter of intense discussion around campus. Many people think the University of Regina, which neighbours FNUC's main campus and issues degrees on its behalf, will take a larger role.

But Jo-Ann Episkenew, an associate professor of English at FNUC, expressed skepticism that the U of R will be able to duplicate the aboriginal-themed courses currently being offered.

"Will they be hiring all our faculty?" she asked.

About 900 students attend FNUC at its main campus in Regina and satellite campuses in Saskatoon and Prince Albert, the federal government said.