When you say that they have lost the ability, what do you mean? Has the Approval queue disappeared from the Moderator dropdown menu? Or something else?
When analysing permissions, did you also analyse node permissions for moderators? If not then check them as they could be overriding group or individual permissions.
If none of that sheds any light, you'll need to post more detail about what has happened - when they had this permission and exactly what changed between that and you discovering they no longer had the permission.