Wow, that is difficult. If you have any kind of decent relationship with this other mom, I would say talk to her about it- but try hard not to sound critical of her, because that will only make her defensive.
I mean, ok, if it was me, I would be like you and be OUT THERE with my kid- but maybe you could just say " I don't want to bother you, but the other day little Jeff was outside by himself and walked right into the street. I went and got him, but I'm just worried he might do it again." Then give her an invite "Maybe tomorrow night do you want to sit out with me and have some ice tea while the kids are playing?"
I am afraid that if she is paying so little attention now, she won't do anything. That's awful, but it might be true. If you can make 'watching the kids' seem like a more social thing, she might feel more inclined to be outside. Maybe you can get another neighbor in on this with you? So you would 'all' be out visiting with each other or working on the yard or something?
I know that TECHNICALLY this is not your responsibility. But you are a good mama and a good neighbor for trying to fix this situation and realizing that a child's safety is the most important thing!
If you put out these feelers and she still doesn't do anything, then you might have to take some other steps. If the child is clean and well fed and doesn't seem abused or neglected in any other way, I am not sure what you should do next. But hopefully the other mom will get it and this will take care of the problem!
Good luck- you're a good mom and a good neighbor!!