Did you talk to the mother again? Caroline should be in or near the area west of Dr Elrath's house.
Is Mardaneus still in Aleroth? Some people have reported problems with finishing that quest after he moves. Some haven't had this problem, so if he is still in Aleroth, you could try waiting until you ask him to leave, or after he leaves, and see if the dialog option to tell him about the murder shows up in either conversation.
You can use the technique in the topic
FIX for broken Imp Council Member quest to finish this quest.
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