I would report it as well. No one can say exactly what will happen after that. But at least your parents wouldn't be enabling her. If she does get arrested and sent to jail, great, it would probably be good in the long run. If not, then she doesn't. But maybe it will get her that much closer to hitting bottom, if you want to look at it that way.
I guess I would say, how would you react if it wasn't your sister/daughter? You'd report the money as stolen, right? I know she is someone you love, but that is no reason to allow her to steal money.
Vanessa