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It does work. You drag and drop projects and folders in the sidebar, not the main window. Described in the help for "Organizing projects into folders" which is among the choices offered up if you type "folder" into the Help search.

On the iPhone, to move projects and folders around, go to the Projects view. Tap the Edit button, then the item you wish to move. At the bottom right corner of the screen you'll see a little file folder with an arrow pointing downward on it; tap that. Now choose the spot in the hierarchy you would like to move it inside. If you don't have to make a level change, but just want to move something around at the current level, after tapping the edit button in the Projects view, use the drag handles on the right to drag and drop it in the desired spot. Tap the Done button when done.