What does 'not work properly' mean? Adjusting the color and/or the tint should change the folder color based on the setting.
Default:

Tint adjusted with the slider:

Color and tint adjusted with the sliders:

Color picker used to click on one of the red tail hawk feathers from my wallpaper:

More info on the Appearance settings pane from Apple: Change Appearance settings on Mac - Apple Support
If the above is not working as expected, that is not normal behavior and I cannot replicate it on my M4 Pro MBP running macOS 27.2.
Have you rebooted your Mac? If not, that's the first step. If that does not help, then see if the problem is present when you boot in safe mode. That process performs some system cleanup and clears caches, and also disables 3rd party extensions that may cause problems.
Start up your Mac in safe mode - Apple Support
If that does not correct the issue, test in a new user account. A newly-created user account will have all settings at default, and if the issue does not occur in that new account then it provides guidance on what may need to be changed to correct the issue.
Add a user or group on Mac - Apple Support
Once the testing is complete, the new account can easily be deleted.
Delete a user or group on Mac – Apple Support
Those steps will help to isolate the problem.
It might help to download and run EtreCheck, written by a long-time forum member. The free version is fine. Post the full report using the Additional Text button. No personal information is revealed.
