I have seen this error a couple of times at different customers. Please always remember to implement a Service Account for both your Data and Config Services.
If you are having more than one Management Server and are still running Localsystem, your Report service could give you errors whenever you try to choose
a Group in the drop-down field. Another symptom are if you choose a Server and click a report it will not bring the computer fqdn to the report.
From SCOM 2012 SP1/R2 your could change the Service Account pretty easy, – Remember to add the user to the Administrator Role and the Local Administrators
And for my consulting colleagues – please do not use localsystem as a service account in SCOM – unless you have one and its a All-In-One server.
Have a great day