"These measures are to guarantee that not one euro will go toward financing illegal acts", Spain's Budget Minister Cristobal Montoro said following the weekly cabinet meeting.
To shield Barcelona's civil servants from possible prosecution, Mayor Ada Colau refused to make municipal premises available as polling places.
This new system will allow the Spanish state to "replace the region for the majority of essential spending", he added.
Never mind that Madrid has declared the ballot illegal, Puigdemont was defiant.
"The will of the (Catalan) government is to continue to focus on dialogue and the exercise of democracy as a way to resolve the debate on political relations between Catalonia and Spain", the letter said.
Since July, Madrid has obliged the Catalan government to provide weekly spending reports in an attempt to guarantee that public cash is not used to organize the October 1 referendum.
On Thursday, Catalan regional Vice President Oriol Junqueras said the arrangement implied "political control" and had nothing to do with budget stability, though Montoro on Friday disagreed, saying the measures were within budget stability rules.
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The region, with a population of 7.5 million, is regarded by Spain as an autonomous community and its people a nationality, in recognition of the area's language and cultural distinctions.
They have also criticised what they see as heavy-handed measures by Madrid to stop the vote.
"We have reached this moment stronger than what many had thought and wanted, as we are proving by responding firmly to each threat", he said.
The state prosecutor has called for the mayors to be arrested if they fail to comply with the summons. An open dialogue without conditions.
Catalonia is set to cast their vote on separating from the rest of Spain on October, 1 amid ever-increasing tensions between the Catalan region and Madrid.
On Thursday, EU Commission President Jean-Claude Juncker said that in the event Catalonia gains independence, it would not be able to become an EU member state immediately after the referendum and would have to follow the same accession process to be admitted to the European Union as those countries that had entered the bloc since 2004. Hours earlier, Puigdemont had made a final appeal to prime minister Mariano Rajoy to negotiate a referendum in a letter which he also sent to King Felipe.
The signatories also accused the Spanish administration, lead by Mr Rajoy of having gone "on the offensive with unprecedented repression".