(CNN) -- [Breaking news update at 8:54 p.m. ET]
President Barack Obama said Tuesday the Treasury Department inspector general's report examining how the Internal Revenue Service allowed for the targeting of "tea party" and other groups shows some IRS employees "failed" to act in a way "that's worthy of the public's trust."
"Regardless of how this conduct was allowed to take place, the bottom line is, it was wrong," the president said.
In his statement, Obama said he's directed Treasury Secretary Jacob Lew "to hold those responsible for these failures accountable, and to make sure that each of the Inspector General's recommendations are implemented quickly, so that such conduct never happens again."
[Original story published at 7:40 p.m. ET]
(CNN) -- Poor management and lax oversight at the Internal Revenue Service allowed for the targeting of "tea party" and other groups, resulting in lengthy delays in the processing of their applications for federal tax exempt status, according to a report from the agency's inspector general obtained Tuesday by CNN.
The report found that for more than 18 months beginning in early 2010 the IRS developed and followed a policy that used "inappropriate criteria" to identify potential political applications and then forwarded those applications to a team of specialists for review.
"The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention," according to the report, obtained by CNN from a congressional source.
The IRS said that it welcomed the release of the Treasury inspector general's report, saying that it agreed that aspects of its original approach in handling the influx of tax-exempt applications was inappropriate.
"The IRS is required by law to determine if organizations are engaging in a legally permissible level of political activity. Centralizing these cases was necessary to achieve consistent treatment," it said in a statement released Tuesday.
"After seeing issues with particular cases, inappropriate shortcuts were used to determine which cases may be engaging in political activities. It is important to note that the vast majority of these cases would still have been centralized based on the general criteria used for other cases. "
The development came hours after U.S. Attorney General Eric Holder announced the Justice Department had launched a criminal investigation into whether the IRS politically targeted some conservative groups applying for federal tax-exempt status.
"The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS," Holder said at a briefing.
The report's findings and the attorney general's announcement come amid growing criticism over revelations that some IRS officials targeted certain groups that had either "tea party" or "patriot" in their names.
"Those actions were, I think as everyone can agree, if not criminal, they were certainly outrageous and unacceptable," Holder said. "But we are examining the facts to see if there were criminal violations."
The report, which contains a response from the IRS commissioner of the Tax Exempt and Government Entities Division, indicated there was no criminal behavior behind the actions, but rather inefficient management and lax oversight.
"We believe the front-line career employees that made the decisions acted out of a desire for efficiency and not out of any political and partisan viewpoint," the commissioner wrote.
The IRS report compiled by the agency's top watchdog found that the criteria used to flag potential political applications resulted in substantial delays and the request of unnecessary information of the groups.
It also found that the IRS team of specialists -- known as the Determinations Unit -- targeted groups with "tea party" in their names and then inappropriately expanded it to include organizations with other names, such as "patriots" or "9/12 project."
"The inappropriate and changing criteria may have led to inconsistent treatment of organizations applying for tax-exempt status," the report said.
"For example, we identified some organizations' applications with evidence of significant political campaign intervention that were not forwarded to the team of specialists for process but should have been."
It also said it identified applications that had no political campaign connections.
The report found that all of the applications that were sent to the Determinations Unit "experienced substantial delays in processing."
"Although the processing of some applications with potential significant political campaign intervention was started soon after receipt, no work was completed on the majority of these applications for 13 months," it said.
The report's findings indicate that of the 296