The cluster-dns-operator does not reconcile the openshift-dns namespace, which has been exposed as an issue in 4.12 due to the requirement for the namespace to have pod-security labels.

If a cluster has been incrementally updated from a version less than or equal to 4.9, the openshift-dns namespace will most likely not contain the required pod-security labels since the namespace was statically created when the cluster was installed with old namespace configuration.

4.12

Always if cluster originally installed with v4.9 or less

1. Install v4.9
2. Upgrade to v4.12 (incrementally if required for upgrade path)
3. openshift-dns namespace will be missing pod-security labels

"oc get ns openshift-dns -o yaml" will show missing pod-security labels: 

apiVersion: v1
kind: Namespace
metadata:
  annotations:
    openshift.io/node-selector: ""
    openshift.io/sa.scc.mcs: s0:c15,c0
    openshift.io/sa.scc.supplemental-groups: 1000210000/10000
    openshift.io/sa.scc.uid-range: 1000210000/10000
  creationTimestamp: "2020-05-21T19:36:15Z"
  labels:
    kubernetes.io/metadata.name: openshift-dns
    olm.operatorgroup.uid/3d42c0c1-01cd-4c55-bf88-864f041c7e7a: ""
    openshift.io/cluster-monitoring: "true"
    openshift.io/run-level: "0"
  name: openshift-dns
  resourceVersion: "3127555382"
  uid: 0fb4571e-952f-4bea-bc45-461beec54369
spec:
  finalizers:
  - kubernetes

pod-security labels should exist:
 
 labels:
    kubernetes.io/metadata.name: openshift-dns
    olm.operatorgroup.uid/3d42c0c1-01cd-4c55-bf88-864f041c7e7a: ""
    openshift.io/cluster-monitoring: "true"
    openshift.io/run-level: "0"
    pod-security.kubernetes.io/audit: privileged
    pod-security.kubernetes.io/enforce: privileged
    pod-security.kubernetes.io/warn: privileged

Issue found in CI during upgrade