A man who received $436,580 from the Australian Government Aboriginal fund has been accused of actually being a New Zealander.
Allan Lodge, 48, obtained a grant reserved for Indigenous Australians last September to expand his furniture company from Darwin to Katherine.
The business claimed to be "100% indigenous owned" on its website.
But last month his former parents-in-law filed a complaint alleging he was of Māori descent, Australian media reports.
"I am horrified that the Federal Government would give this man a government grant," his former sister-in-law Elva Hunt reportedly wrote in the complaint.
"Allan Lodge is claiming now to be indigenous but he told me he had New Zealand heritage."
The board of the Northern Territory Stolen Generations Aboriginal Corporation awarded Mr Lodge the grant out of an allocated AU$4.9 billion budget for 2015-2019. But the board's new chief executive now says that never should have happened.
"This seems to have just fallen through the cracks," Eileen Cummings told ABC Radio Darwin.
"We were horrified at the way this happened."
Ms Darwin told the radio station all future confirmations are to be referred to the applicant's home state. This, she says, did not happen in Mr Lodge's case, who is from New South Wales.
Last month Mr Lodge told the ABC the allegations against him were "very upsetting".
He may be still able to re-apply for confirmation in his home state.