Devon County Council has called for an independent investigation into the cost of Exeter City Council's proposal to become a unitary authority.
Exeter's move is supported by all political parties on the council
The city was one of 16 local authorities which made it on to a government shortlist this week.
Devon County Council wants the Audit Commission to carry out financial checks, saying it will cost £20m, not the estimate of £6.5m.
Exeter Council said it knew how to pay off set-up costs within five years.
Devon County Council said the city council's business case that it would only cost £6.5m to create a new council was wrong.
It argues that the cost is more likely to be at least £20m.
Devon County Council said that the city council's costings were so far out of line with those for similar-sized authorities that there should be a thorough independent investigation now before any more public money was wasted on the exercise.
Exeter City Council said it was keeping to its set-up estimate of £6.5m, and had identified how it could pay the costs off within five years through more efficient and innovative working as a unitary council.
It added that, overall, a unitary council would have a cumulative saving of £13m available over the first five years to invest in service improvements.
Exeter said unitary status would avoid duplication that existed through sharing power with the county council.
It said the current set-up meant expenditure was "skewed further away from the city than it should be".
If it is granted, the council said unitary status would mean it should be able to direct that money where necessary.
The city council bid has all-party backing.
The bid is now to undergo government consultation. A final decision is expected in July.
The government said that, if successful and subject to the Parliamentary process, those who succeed in getting the unitary status are expected to be operational by April 2009.