Is it permissible to buy gifts for diligent students to encourage them, and to buy books for students who do not own books, from a sum donated by a guardian to the class without specifying the purpose of the expenditure?

The fundamental principle concerning donated funds is that they should be spent on what the donor specified. If the donor did not specify a particular purpose, then whoever is in charge of these funds may spend them on what benefits the students of the class, such as purchasing prizes for outstanding students or books for those in need.