We have used the money to pay bills, buy household things, fix our vehicles but with an understanding that he will pay back everything when he gets back on his feet. Can he be charged with anything or get in any trouble if she agreed to giving it to him?
He can not borrow from her since she is not competent to agree to a loan.
And if she has dementia and his POA is in effect she is NOT competent.
If at any time there has to be an application for Medicaid the proverbial s... will hit the fan and he can be charged with elder financial abuse.
To me it sounds like you've taken advantage of this poor woman and yes, that is elder abuse.
It is reasonable to accept money from her and your husband can also charge for his sevices as her POA. That does not have to be free either. He needs to keep records of every time he has to make a phone call for her, straighten something out for her, run an errand for her, etc...
Unless your MIL is putting out large sums of money to you and your husband and signing over property like real estate and such, it won't affect her if she needs Medicaid at some point because you put her in facility care.
You can check with Medicaid and should, but the rules used to be that they didn't consider any money under $10,000 "gifting". They may now, so you would do well to check with them.
Also, if your mother has not be declared legally incompetent and there's no formal diagnosis of dementia, she can spend her money any way she wants. If she needs to go into care at some point, they cannot recover that money.
I knew an old senior with no diagnosis of dementia (but he had it) who handed out big amounts of cash to his grandkids and blew the rest of his assets on casino gambling. When his family was finally able to get him into memory care were he should have been long before he was, the facility had some questions about the large cash withdraws from his bank accounts. His daughter told them to go down to the casino because that's where his money went. He got approved for Medicaid and was put in memory care.
He had the sense to transfer his real estate over to his daughter long before he ever got dementia because he moved into a senior apartment. So that was a protected asset.
While at this legal meeting with a certified elder law attorney do arrange to have shared living expense contract for those months mom is with you. Don't call it rental as that money would be taxable for you. It needs to be called "Shared Living expense" so that it isn't. Includes food, housing costs and etc.
Now the fact you bring this up lets me know you aren't understanding POA very well and that is very dangerous. You could get mom in a good deal of trouble if she ever required government help and unless she is a multimillionaire, she may some day. She would be accused of gifting her son and disqualified for help for 5 years in most states, and 2 1/2 years in California. They always say "Ignorance is no excuse before the law" so when you ask "Can we get in trouble" the answer is "Yes, you most assuredly can. A POA has a right to get paid for asking for expert help. That reads ATTORNEY. Now.
If she will need Medicaid, all of this will be considered gifting, and will hinder her getting Medicaid as there is a look back in years, depends on the state as to how long.
My 96-yr old Mom with mild/moderate dementia lives next door in a house I own. I'm her DPoA. I have an itemized rent invoice that outlines what her rent covers (it is pass-through, so it just covers the expenses and nothing more). She pays it by auto-pay transfer from her bank account as a separate and distinct transaction so that it is easily tracked. She also contributes a specific amount of money every month for her share of food (since I do all the buying and the prep). This is also auto-pay as a separate and distinct transaction.
But you should get clarity on this from an elder law attorney so that you don't get afowl of the law. What happens when the day comes when she doesn't remember agreeing to it? Paranoia can come with dementia, so can irrationality and memory loss. My Mother gets spots of paranoia where she thinks I'm robbing her blind. Most of the time she is very functional, but eventually that won't be the case.
The PoA's job is as a fiduciary to the principal and your husband needs to take it very seriously.