What steps do I take when my grandchild has been touched by her father in an inappropriate place?

First, who is the legal guardian of this child?  That person should be notified immediately.  Next, that person should report this conduct to the police, as soon as possible.  The fact that the father moved out of state has no relevance on whether or not this should be reported.  If there is probable cause to believe that he committed the crime (after the officers have investigated) then a warrant may issue for his arrest.  Moreover, child services may be notified, and therefore he may be prevented from repeating this behavior both with his daughter and/or with any other children.