Great grandparents giving money to child/ grandparents want to manage money.

You are the legal custodian and guardian of the child...you have complete control over what to do with any monies given to your child....the grandparents can try to file some kind of custody action if they believe AND CAN PROVE you to be an unfit parent. It does not sound like this is the case.
With any family dispute sometimes being blunt with relatives leads to bad feelings and resentment that can cause bigger problems...perhaps you could have some kind of compromise with the grandparent...since both of you seem to be working for the best interest of the child.
Bottom line is they have no legal say so over the gift.