Using the implementation of Governmental Accounting Standards Board Statements No. 34 and 35 (GASB 34/35) across U.S. public institutions and colleges, I examine how mandatory financial disclosure by contractors affects federal agencies’ funding allocation. I find that GASB 34/35 adoption leads to a decline in federal grants to public research universities relative to private ones. I provide evidence that monitoring and private information signaling are likely the underlying mechanisms. Specifically, after GASB 34/35, reductions in federal grants are larger for public universities with greater organizational complexity, and federal grant allocations become more responsive to prior private funding signals. Despite this reduction, research output improves, as measured by patents and publications per million dollars of research expenditure. I further document spillover effects of changes in federal funding on other university stakeholders. Overall, the findings show that financial disclosure regulation has real effects on government investment decisions in public procurement, with downstream implications in the higher education sector.