Under the Protected Objects Act, the museum is required to promptly authenticate all artefacts brought to it by the public.
The Ministry for Culture and Heritage pays the museum an annual sum to do so - most recently $7000 - but the museum has long insisted the payment is inadequate.
Museum chief executive Shimrath Paul warned in October that museum staff could be directed to cease processing under the Act if satisfactory agreement had not been reached by October 31.
Otago Museum Trust Board member Syd Brown said yesterday he felt "just a little bit nervous" about a proposed draft letter from Mr Paul to the ministry, announcing that the authentication work would stop because of the funding deadlock.
Mr Brown told a board meeting that museum authorities could "cut off our nose to spite our face", if ministry support was needed to gain funding for a future project.
Mr Paul said the long-running funding dispute involved an important point of principle, that the overall relationship with the ministry remained " pretty good" and that the museum would definitely not be disadvantaged over future funding.
"I feel very strongly about this," he said.
Board deputy chairman Malcolm Farry agreed a significant principle was involved.
He took Mr Paul's point that if the museum were to "knuckle under to everybody in Wellington" then positive changes would not result. However, he suggested that museum authorities "take a step back" and see if matters could be resolved in a different way.
The current ministry chief executive was serving in an acting capacity, and further action should be deferred until a new head was in place. The museum's concerns could then be raised directly with that person, he said.
Mr Paul said he was happy to take the suggested advice.
• The museum has been seeking $15,000 a year, as well as a consumer price index adjustment, from the ministry for the next three years.
