An Australian National Audit Office report found 50 per cent of the 2021/22 mining royalties paid to Anindlyakwa Land Council were invested into Winchelsea Mining.
A petition from the Anindilyakwa people and traditional owners of Groote Eylandt was tabled in parliament in February, signed by 235 residents, almost 16 per cent of the island's 1400 Indigenous adult population.
The locals called for a federal inquiry into the land council after a damning audit found millions of dollars in Indigenous royalties were being funnelled to Winchelsea, which is  directed by the land council's chief executive Mark Hewitt and chair Tony Wurramarrba.
"We the Anindilyakwa people and traditional owners and extended families of the Groote Archipelago ask for clarity into the findings of the auditor general report," the petition reads.
"Members of the ALC executive and board of directors may not have acted in their employed and elected roles in good faith for the governance of the people of the Groote Archipelago.
"We call for an independent investigation into potential gross misconduct of terms of employment of the ALC executive and elected positions of the board of directors, in order to restore good faith in the ALC's ability to govern the people of the Groote Archipelago in their best interests and without prejudice."
The audit found risks of conflict of interest were "high" as Winchelsea is co-directed by Mr Hewitt and Mr Wurramarrba.
The 2023 audit also found the council finance committee approved 99 per cent of the funding requests from Mr Hewitt, compared with 53 per cent of other requests.
"The (audit) observed disproportionate benefit to the entities with which the CEO is associated," the report reads.
Groote-based Aboriginal corporations do not have the opportunity to present funding applications in person, the report found.
Mr Hewitt fronted a senate estimates hearing on February 16 and said since the audit the council had adopted 10 of the report's 15 recommendations.
He clarified that he was not the owner of the Winchelsea Mine, though is listed as director, secretary and chief executive, while shareholding is split between Anindilyakwa Advancement Aboriginal Corporation and a Chinese mining company.
The land council's own internal audit committee, responsible for overseeing the implementation of the recommendations, was also found to have conflicts of interest.
Mr Hewitt said the council was working to ensure the council audit committee chair was independent and undertaking all mandatory functions.
The ALC audit committee chair is the founder of Enmark Consulting, to which the council paid $896,056 in consultancy fees between 2014/15 and 2021/22.
The committee charter requires each member to provide annual declarations of "any material or personal interests that would preclude them from being members".
The chair and other members have never made a declaration.
