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Answer: A mishna (Shekalim 2:5) says that if money is raised to support a poor person or ransom a captive, any leftover money after the needs were taken care of goes to the person for whom the money was raised. There are multiple opinions of what to do with money remaining from what was raised for a funeral – to the inheritors; left untouched; to create a commemoration. The Yerushalmi (ad loc.) brings a machloket regarding money that was raised but turned out was not needed.
Among Rishonim, the Beit Yosef (Yoreh Deah 253) cites a machloket between the Rashba and Rosh regarding unspent money of pidyon shvuyim. The Rashba (Shut IV:55) says that if money was raised to ransom someone and he died before being ransomed, the money goes to his inheritors, based on the mishna above. The Rosh (Shut 32:6) addresses a case where the kidnapped woman decided not to return to the Jewish community. He ruled that since the donors did not intend to donate money for such an occurrence, the money should return to them. He distinguishes between his case and the mishna – the mishna is when the money was primarily used as planned, in which case, donors do not seek any returns. In contrast, if the money turns out to not be needed, it is returned. The Shulchan Aruch (YD 253:7) cites both opinions, but prefers the Rosh. The Rama (ad loc.) and other poskim (see Shut Chatam Sofer II:237) also accept the Rosh.
Therefore, the general answer to your question is that if the need disappeared, the money should be returned to the donors. However, cases can differ from each other. The Chevel Nachalato ((Epstein) II:37) refers to a case where the fundraising campaign focused on the dire financial situation of the family of the sick woman, so that there was logic to want the money to go to the family when she died pre-surgery. He justifies this due to a weaker assumption that people would want their money and also due to authority of tzedaka collectors, as we now explain. A public charity organization has the right to make decisions to change the intended recipient from that which the donors were informed of (Shulchan Aruch, YD 256:4). Therefore, Rav Epstein encouraged the charity fund to change the funds from medical to helping the impoverished family.
It is not clear if you are fundraising independently for the family or funneling funds to and through an NPO. The latter has some technical and halachic advantages. First of all, donors who pass the tax threshold benefit from significant tax breaks through a qualified NPO. It also shields you from questions that could arise about how you handled the money. On the halachic end, we have seen that public charity gabbaim have the authority to make decisions what to do with funds in cases like you raise. If someone specifically does not want that but wants the money back if the need changes, he could indeed use you with an explicit stipulation, which would work. On the other hand, some organizations (one should not generalize) take a percentage of the contributions earmarked for a person to cover overhead (which is legitimate), so raising and giving the money directly to the person in need can sometimes help him.
If you act independently, you should document the sources of the money carefully, for several reasons. The Rosh (above), while fundamentally advocating return to the donors in cases like these, acknowledges that this is not always feasible, and suggests using the money for a project helping the masses or for a need of the same type. If you have already passed the money on, you have no responsibility to try to get it back. However, if you document at least sizable donations that are still in your control, you would owe to the people who trusted you to ask them what to do with the money that became unused for its intended purpose.
Bemare Habazak - Rabbis Questions (651)
Rabbi Daniel Mann
661 - Ask the Rabbi: Giving Away Offensively Left Materials
662 - Ask the Rabbi: Collecting Money for a Specific Medical Cause
663 - Ask the Rabbi: The Power of Rabbis in Berachot
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