Is it better to give a sum of money collected for a deceased colleague to his children, or to donate it for the construction of a mosque as an ongoing charity on his behalf?

If the money is still in the hands of the questioner, they should consider what is most beneficial:

If the deceased's children are in need of the money now, it must be given to them.

If they do not need it now but will need it in the future for their educational and other needs, the money can be made into an investment endowment (waqf istithmari), with its returns spent on the children's religious and worldly interests. The reward for this will go to the deceased.

If they are not in need of the money, it should be allocated as an ongoing charity (sadaqah jariyah), such as building a mosque or digging a well.