If a person has knowledge of a crime they are supposed to report it to the police. Not their superiors at work.
When it comes to child abuse there are specific laws to be followed. In the case McQueery saw, police can only respond to eyewitness(McCueery) or proper reporting authority(Penn State police or admin). What Paterno had was 2nd hand info and not complete. By law he had to go through proper channels which he did. Even if Paterno went to the police there's no guaranty anything would have been done since Paterno wasn't the proper reporting authority. Plus you have the '98 incident which the DA dropped which doesn't say much for local officials.
As they say, hindsight is 20/20. I'm sure Paterno wished he did more, that's a completely natural feeling. But that doesn't mean he knew what was going on.
All the NCAA sanctions are based on stuff that happened after Sandusky left Penn State and before the legal process could play out. Why the big hurry?
Also, IIRC Sandusky was aquited of the McQueery incident. Not that he should have been but but the only incident remotely involving Paterno resulted in aquital which makes the sanctions BS in my book.
So then why didn't Mike McQueary report what he saw to the police????
All anyone else had was his hearsay of an incident which kept changing over time.
And then when what he said he saw finally made it to court, the jury dismissed it.