An investigation is being launched by the National Audit Office into the failed Leeds Supertram bid.
Leeds is one of the few large cities in Europe not to have trams
Almost £40m was spent on the plans before they were rejected by the Department of Transport in November.
The investigation will look at whether public money was spent appropriately by the department.
Transport Secretary Alistair Darling turned down the Supertram plans on the basis that the likely cost of £500m did not represent value for money.
Instead, he said Leeds should spend money on more frequent bus services using new vehicles.
Leeds North West MP Greg Mulholland told BBC News he had been told of the Audit Office's decision to launch the investigation and welcomed it.