This is actually a feature of the later versions of Bootstrap, which Moodle now uses - it only supports the one level of drop down on the menus. From memory, someone did manage a workaround for this in one of the themes, but I'm sorry I don't remember which one.
This page may be useful? http://bootstrapessentials.com/fulldocs/components/navbar/navbar-submenu/
This page may be useful? http://bootstrapessentials.com/fulldocs/components/navbar/navbar-submenu/