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Hello JA Customer,
The IRS would not be an issue here as the funds in that account are not taxable. They were given as non deductible donations by people who wanted to help your co-workers daughter, so no tax is due on the funds.
The ethical thing to do would be to give the rest of the money in that account to the person who the donations were intended for, as they may still have more medical bills in the future related to this condition, or may have other expenses to pay. And the donors of the money intended for the funds to be used by that person. The other thing you could do is refund the money to the donors based on the percentage they originally contributed of the total funds collected.
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Thank you JA Customer