The Scottish Liberal Democrat leader is calling on the Scottish Parliament’s public audit committee to carry out the investigation into the spending of deploying civil servants to draw up legislation and a prospectus around independence.
The call comes as reports in the Daily Express have revealed that two officials are working on laws to bring forward a second independence vote.
Meanwhile, one senior civil servant and 14 other officials are dealing with a separate referendum blueprint, at a cost of up to £900,000.
Commenting on the figures, Mr Cole-Hamilton said: “We need clarity as to what these civil servants are doing all day and what it means the government can’t do to help the people of Scotland as a result of their work on separation.
“How in the middle of a cost of living crisis, a pandemic and a refugee crisis, can the SNP government justify this spending?
"This eyewatering cash spent on their pipe dream certainly amounts to a catastrophic mismanagement of public funds.
"Despite all our calls for the Scottish Government to drop their work on IndyRef2, they continue to pursue their reckless separatist agenda whilst ignoring our under-pressure NHS.
"It's now got to a point where we need the Parliament’s public audit committee to look into this referendum preparation spending to get independent answers on whether this public money is being spent efficiently and effectively."
The First Minister has repeatedly claimed she will hold a referendum before the end of 2023 or when the pandemic allows.
However, the UK Government, which holds powers over the constitution, has refused to engage with the SNP-led Scottish Government on the issue.
Last month, a poll undertaken by Savanta ComRes for The Scotsman, found that a majority of Scots think plans for when a second independence referendum could take place should stop due to the ongoing Russian invasion of Ukraine.
Scots were asked whether they believe discussions over when a second independence referendum should take place should stop due to the Russian invasion of Ukraine.
In total, 59 per cent of Scots said they should, compared to 29 per cent stating they believed the discussions should continue.