Suggested fix:
Within /core/category_api.php for function category_get_all_rows around line 426
include project_id=0 as well, ie:

if ( $t_inherit ) {
    $t_project_ids = project_hierarchy_inheritance( $p_project_id );
    # BOB
    # $t_project_where = ' project_id IN ( ' . implode( ', ', $t_project_ids ) . ' ) ';
    $t_project_where = ' project_id IN ( ' . implode( ', ', $t_project_ids ) . ' ) or project_id = 0 ';
} else {
    # BOB
    # $t_project_where = ' project_id=' . $p_project_id . ' ';
    $t_project_where = ' project_id=' . $p_project_id . ' or project_id=0 ';
}

This is not a bug. When upgrading projects from 1.1.x, they will continue to not inherit global categories by default; you will need to manage the project, and check the "Inherit Global Categories" box and then save the project. New projects created after upgrading to 1.2 will default to inheriting global categories. This is all to maintain existing behaviors until otherwise selected by a system/project manager.

Actually the error still occurs whether the inherit global categories checkbox is checked or not checked.

Reopening as there is still a bug.

Better fix is in core\graph_api.php within create_category_summary function.
The specific_where only selects categories from selected projects and ignores the global categories. The global categories should be included even if they are not used. Around Line 758. Change

$query = "SELECT id, name
            FROM $t_cat_table
            WHERE $specific_where
            ORDER BY name";

to
$query = "SELECT id, name
FROM $t_cat_table
WHERE $specific_where or project_id = 0
ORDER BY name";

Kicking this over to Paul, as he's the one that's been dealing with the graphing systems.