Your question is not clear from the information presented.
If you are asking about the tax consequences of asking for public support and accepting the funds into a bank account in the name of an individual or business who is not to be the actual recipient of the funds and where the funds were not donated to a 501(c)(3) charity, there are definitely rules and laws that govern. The people involved should consult with a qualified tax advisor regarding their current circumstances and tax implications and consequences. It seems that someone has received some advise from an accountant and does not like that advice. I cannot tell you that the advice was incorrect or based on an erroneous understanding.
If you are asking about the purported basis for the fundraising - that is, to cover "funeral costs because there was no insurance to cover the costs of burying 2 sons", it is unclear that there has been any fraud or misrepresentation. The ability to use money from another source, that is, the "grandmother's insurance" does not necessarily mean fraud or that there is a legal limitation on the use of the money donated. However assuming that the initial collection efforts were lawful, if your "friend" collected the money for one purpose and feels that it is improper to turn over the funds for the purpose collected, then she needs to contact an attorney to discuss the legal position. It is possible that the failure to use the money for the purpose collected could be a criminal act or create civil liability. The state Attorney General's office may be able to provide you with additional information regarding the use of these funds.
If your question regarding the initial collection efforts were lawful, again your friend needs to consult with legal counsel to determine what documents were initially executed from the bank and in connection with the solicitations.
As for any claim of defamation, there is insufficient information to address this issue.
Please be aware that, although I am a Georgia attorney, none of the above should be construed as providing legal advice. The information and answers sought are well beyond what may be answered on a general website such as this. You need specific legal advice and should seek a qualified Georgia attorney who focuses on these types of tax, defamation and charitable issues as promptly as possible.