About 800 students attend First Nations University of Canada at its main campus in Regina and satellite campuses in Saskatoon and Prince Albert. (CBC)

The Saskatchewan government says it will continue funding First Nations University of Canada after learning a deal has been signed to allow the University of Regina to handle the FNUC's money.

As a result of the memorandum of agreement released Tuesday, provincial dollars that had been cut off will resume flowing to the Saskatchewan-based institution, Advanced Education Minister Rob Norris said.

"It's an optimistic step," Norris told reporters. "We think it's going to provide greater certainty for students and greater accountability for taxpayers."

Norris and federal Indian Affairs Minister Chuck Strahl announced separately in February that funding for FNUC was being cut.

The university has about 800 students at its main campus in Regina and satellite campuses in Prince Albert and Saskatoon.

There was no immediate word on what Ottawa will do now, but Norris said earlier this week he would need the agreement to try to convince Strahl to restore funding.

Under the four-year agreement — which was signed by officials from the province, the two universities and the Federation of Saskatchewan Indian Nations — provincial money earmarked for FNUC will be paid to the University of Regina, which will administer the funds and manage the institution.

In the first year of the deal, while FNUC restructures, $5.2 million in provincial money will be provided to the third-party administrator.

By the end of the four years, the FNUC is required to hire a new president and other senior managers to handle its academic, administrative and financial management matters.

Cadmus Delorme, the FNUC student association vice-president, said students were pleased with the news but are waiting to hear what Ottawa will do.

Students are camping out at the campus this week and say they'll be there until Strahl reinstates the federal grant, which is worth about $7 million a year.

Earlier in the day, Strahl told the House of Commons he hasn't changed his stance and still has serious concerns about what's going on at FNUC.

"It was a week ago when we found out that hundreds of thousands of dollars were missing out of the scholarship program designed for kids, and in this last week, the administrator has been dismissed," Strahl said. "Problems still continue there and there is more work to be done."

The university has struggled with various problems in recent years, with numerous dismissals and departures of top administrators, allegations of misuse of funds, repeated deficits and declining enrolment.

Ottawa and the province both said they cut funding because FNUC wasn't fixing the problems fast enough.

Among the concerns was that the board of governors was too big and First Nations chiefs had too much control.

After funding was halted, the group that controls FNUC — the Federation of Saskatchewan Indian Nations — dissolved the board and appointed a smaller group. The group also fired some top administrators and agreed a shared management model with the University of Regina was the way to go.