James has the best advice...if you can, head them off at the pass. Under past administrations, our museum was accepting anything that came in the door for a long time; the result being a MAJOR lack of space. The director and myself have now instituted an "Accession Review" policy. Whenever anyone brings anything in, we explain to them in detail how the policy works and answer any questions that they have about it. After the committee reviews the items, we contact the potential donors about it and have them either come back in and sign the forms (if it's accepted) or take the item back (if it's rejected). We've been using the accession review policy since the first of the year, and so far we haven't had a problem with angry people when things weren't accepted.
As a back up, when we reject and item I always tell them the reasons behind the rejection (i.e. it would be unethical for us to take it when we can't properly care for it because of lack of funds/space/staff/etc) and try to suggest other institutions that may want the item.
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