The research seeks to explore the role of mental accounting in spending decisions made by administrators in higher education in Iraq. The quantitative analytical approach used data obtained from 200 administrative personnel from 4 universities and 50 technical colleges to explore the association between academic specialization, experience, the institution environment, and cognitive aspects of financial decision-making. The analysis indicates that mental accounting had a significant effect on the rationality of spending decisions, accounting for nearly 59% of the differences in expenditure deviation. Administrative personnel who showed cognitive fund segregation had relatively higher deviations from planned expenditures, particularly for the Higher Education Fund, where the propensity for discretionary spending was the greatest. Academic specialization and experience moderated the impact of cognitive fund segregation by increasing analytical reasoning capacity, and decreasing behavioral bias. Analyses of regression and ANOVA confirmed that behavioral factors, when combined, have a statistically significant influence on financial decision outcomes. The results support the conclusion that while formal financial processes guide expenditure management, the judgment of expenditure is often grounded in cognitive and experiential dimensions of decision-making. The study closes by arguing that to improve financial rationality in public organizations requires behavioral remedies (e.g., training based on academic specialization, cognitive awareness programming, and institutional openness) meant to align mental accounting processes with good administration.