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I will try to best answer your question. Your relative has no legal obligation to help or pay for this child. It sounds like your relative is a very nice person and would like to help if financially able. I would absolutely recommend calling social services. If family member is willing to care for the child if finances are provided then your family member could see about maybe being approved as a foster parent and receive a stipend for caring for the child. This would be completely voluntary as there is no legal obligation to care for this child. It sounds like a very sad story.
Yes, it is possible. By providing care your family member is creating an in loco parents relation which means acting like a parent. For example of the child does not recieve appropriate medical care, nutrition, or supervision that family member could expose themself to allegation or charge of neglect. I hope this addresses your concern.