The fallout between the university's governing body, the USP Council, and the head office host nation, Fiji, came to the fore following the deportation of the Vice-Chancellor and President (VCP) three weeks ago.
Pal Ahluwalia and his wife, nursing lecturer Sandra Price, were forced to leave Fiji after the government claimed the couple had breached provisions in their work permits.
USP Chancellor and Nauru President Lionel Aingimea has condemned the removal of the Canadian-born academic.
Aingimea said the USP Council, Professor Ahluwalia's employer, was not informed of his deportation by the Fijian authorities.
The Council had not revoked Prof Ahluwalia's contract, he said.
The Nauru leader said the USP was not a political institution and should not be treated as such.
Although based in Suva, the USP is owned and managed by 12 Pacific Island governments whose interests, said Aingimea, they need to serve well.
He said it was called the University of the South Pacific because it was inclusive.
"It is not a university of any particular country," Aingimea continued. "It is not a political institution; it should not be treated as a political institution.
"It should be treated as a place where ideas are fostered, where learning is upheld to be sacrosanct.
"I am also concerned that because of the reputational risk that USP carries, that we have to carry a reputation that will want donors to come in and give money."
Aingimea said donors wanted to invest in the university's maritime school, law school, and other schools within the institution.
He said these donors need to have the confidence in the university's administration.
"Donors need to see that we have the governance ability to be able to use their money well and to use it for the betterment of the Pacific countries.
"One of the most important things for us to remember is that the university is a regional institution and what I would like to basically tell the students and the staff is this, as a chancellor that I want to reassure them and want to emphasise that first and foremost are the staff and the students of the USP, their interests come first.
"Good governance strategy and vision must go hand in hand and that's what many council members are concerned with and of course council must always be thinking 'how do we safeguard our students, how do we safeguard our staff?
"That also is of great importance."
Meanwhile, the USP Council is yet to decide on the Ahluwalia's fate as the sub-committee appointed to look into the legal aspects of his deportation is yet to submit its recommendations to the Council.
In a joint statement, staff unions at the university said the university's governing body, the USP Council, is the employer of Professor Ahluwalia and had not revoked his contract.
"Therefore, in justice and fairness, the USP Council has agreed that Professor Ahluwalia will continue to receive his salary and full benefits of the position including reinstatement of his official email until a final decision is taken on the matter."
Earlier, the Fiji Human Rights and Anti-Discrimination Commission called for an independent investigation into all issues arising out of the USP.
Its director, Ashwin Raj, said the investigations should include complaints raised by staff and students on the ongoing governance issues at the university.
Raj also said these should also include grievances against Ahluwalia.