The ABC reported an independent investigation found exploitation of allowances and bonuses had cost the USP a significant amount of money over several years.
USP Vice-Chancellor Professor Pal Ahluwalia told a Fijian Parliamentary committee last month that the Australian government had not provided its annual funding of $US9.5 million.
It had only provided $US2.4m at the start of the year, he said.
In a statement, Australia's Department of Foreign Affairs and Trade (DFAT) said it and the USP had agreed to modify the schedule of payments to support reform actions by the university.
A tranche of a $US2.4m payment was released last month after the university appointed an independent commission to implement the investigation's recommendations, DFAT said.
Funding should return to normal in the in the first half of next year, it said.
The Australian government is the university's largest donor and in January prime minister Scott Morrison announced a new funding partnership worth $US57m over six years.