If this is true, what is the admin of the reporting user even supposed to do

Decide what instances to defederate. They can check up on:

• Mods of other instances to see if they take appropriate action on reports.
• Admins of other instances to see if they take action against bad-faith mods.
• Admins of other instances who generate a disproportionate number of reports per capita, to address structural, cultural, or policy issues that lead the offending instance to be a bigger source of pain/reports than others.

And finally they can defederate if they don't like what they find.