Mother has dementia. In early stage she realized she had problems and wanted both children to have power of attorney together. The banks will not accept the combined power of attorney. The two children do not trust each other. The child living closest says"I can get Mother to sign anything." How can the financial rights of the other be protected? All her CD's are POD to both equally for now. Mother is being manipulated by daughter wanting single power of attorney.
Co-POA is never a good idea, it rarely works.
You have different predicament. Best if you can talk with sis and set up some kind of trust or quarterly review of accounts. She should be spending and acting for only expenses and finances associated with the care of mom and these must be substantiated with receipts...food, housing, utilities, car gas, recreation, clothes, pharmacy, diapers, etc...if not then she isn't a good steward of moms estate and Dianne's and could have to answer in court in the end and pay back anything reasonable she can't account for.
If you suspect mismanagement, then you can report to APS or other for financial fraud and taking advantage of senior.
Make her aware that you are watching and expect her to substantiate all spending with receipts and if not you will have no choice but to take legal action.
And FWIW, I am also documenting every single time I telephone my paretns, or their doctors, or caregivers, or any other phone calls I make on my parents' behalf, and the time I spend on this is not trivial.
Yes, the best way is for the closest geographically person to be caregiver (if they want) but definitely to be the DPOA and Executor (and Trust if there is one). This is because it will be a boatload of money cheaper for that person to do everything, assuming the out of state siblings can trust them. It automatically becomes more expensive, because the sibling who has to spend an extra few hours a month or per quarter, to prepare the accounting statements is going to either get reimbursed for that time, or it will "cost" the parents as less caregiving time will be available to them.
So there is no two ways about it.
The kids who are not the POA, if they "demand" to know where the money is, to the extent that they want to see "everything".....the parents will lose out. I don't know of any way for the other siblings to be apprised of "everything" unless they are given viewing rights to every account, and a 24/7 camera of not only the parents (every room in their house) but also the DPOA's house, and car.
TRUST can go a long way in making life easier for your parents. In the absence of concrete evidence that money is missing, you just have to trust the DPOA.
My brother and sister have joint financial POA. It is a pain in the b.t.m. for me, the full-time caregiver, and a thorn in my sister's flesh because she has to run round the houses chasing my brother for signatures and consult him about decisions she's a great deal better qualified to make - and all because my mother believes in my brother's God-like powers of judgement and omniscience. Trouble is, at the time my mother put it together nobody seriously thought it would be needed - they treated it as a formality, the whole thing hadn't even occurred to me, and I wasn't involved. We live and learn, but none the wiser grow…
It certainly would not be right for, as the original questioner put it "Mother is being manipulated by daughter wanting single power of attorney."
But it is easier to see evidence of a bad DPOA when it is a sole person, versus 2 people trying to "share" it. Especially if the 2 people don't get along.