I would choose something specific, say food or decorations, and tell her that if she wants to contribute. it would be wonderful if she could cover the cost of that part of the shower, but reiterate that it is optional for her and that you would be happy to take of everything if she changes her mind.

How nice of you to put on an event that I'm sure she'll remember forever.

I'm unsure what you're asking, exactly. do you want to decline or accept her offer? Would you welcome a financial contribution, but not sure how to accept, or are you resentful of another coming in at the last minute to ride on your hard working coattails? By that I mean, throwing money at you and then taking credit as a co-host. (as I might be)
If it's the former, I'd simply say, Oh that is so sweet of you! I'd love help with the Blank. ( drinks, flowers, whatever).
If it's the latter, I'd say, " Bless your heart!( if you're southern:>):>) But no, I have everything covered and love doing this for Becky-Boo .But thank you so, so much for offering!" Either response is appropriate, I believe.

I think she offered too late....(maybe intentionally?)

If the invitations have already been mailed it would be hard to add her as a co-host, wouldn't it?

Etiquette certainly doesn't require you to decline, but if you accept her contribution, you will need to give her credit as a co-host by thanking her publicly at the shower if the invitations have already been printed.

Thanks for the suggestions. The timing is really the problem --the shower is in a few days (I meant to type 'this weekend' instead of 'next weekend). If she'd made the offer beforehand, I would have listed her as a co-host on the invitations and accepted any contribution she can make without a second thought. In fairness, she may not have known about the shower until fairly recently; the guest of honor didn't put this sister on the guest list b/c she lives so far away that there was no way that she'd be able to attend. But innocent or not, this a last minute offer of assistance. So at this point, if I accept, I'd just be taking her money without having any public acknowledgement of her role. While I wouldn't mind the financial help, I am more concerned about not doing anything tacky than with the $. If it's tacky to accept under these circumstances, I will say no; otherwise, I'll find a polite way to accept.

Looking at if from a sister's point of view. If I lived very far away from my sister I absolutely would be sure to send her a nice gift. If I wanted to do more, like help cover some of the shower costs, I'd extend that offer, much like your friend's sister has done.

If my offer was declined, even very politely, I think I'd probably feel a little bit hurt. Shut out. Because I care for my own sister dearly and even though I might live far away I'd still want to feel like I was participating in this special event, giving extra support to her as sisters often do. It would make me feel close. (If I lived close I'd probably have thrown the shower myself.)

Some from point of view of the sister, I think she just wants to be able to be part of a very special event in her own sister's life, even if she can't physically be there.

Does any of that make sense?

Forgot to add, I tend to doubt the sister is doing this for any kind of 'credit' or special mention. My tendency is to think she just wants to be part of something out of love for her sister that she's physically not able to attend.

And I think a little verbal mention at the beginning of the shower would be nice as well as appropriate, such as "Sister is saddened that she couldn't be here, but I do want to mention she's here in spirit and helped with the shower." (Something like that. Doesn't have to mention how she helped, just that she was part of it.)

Moonshadow--that makes perfect sense, and thank you for articulating it so well. That is what I was worried about when I mentioned that I was miffed when another friend declined my offer to help pay for a mutual friend's shower (I felt that she was trying to shut me out, and it still stings more than a year later). I don't want to hurt my friend's sister's feelings at all; if she'd had any trips planned to this area, we definitely would have included her.

I like your suggestion for how to mention her as well.

You've given a clearer picture, and moonshadow has nailed it! Nicely done and exactly how I'd handle it. Have a beautiful party!

Thank you! I was probably too tired last night to express myself clearly, but I'm really glad that people answered anyway.