WASHINGTON – Federal authorities have opened a criminal investigation of whether Internal Revenue Service employees broke the law when they targeted conservative groups seeking tax-exempt status, the latest setback for an agency that is the subject of withering bipartisan criticism and multiple congressional inquiries.

Attorney General Eric Holder Jr. said Tuesday that the Justice Department and the FBI began the probe after the IRS acknowledged that it selected conservative groups with the words “tea party” and “patriot” in their names for special reviews.

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Attorney General Eric Holder is questioned at a news conference Tuesday about the Justice Department’s gathering of phone records from the Associated Press. The Associated Press

“We are examining the facts to see if there were criminal violations,” Holder said at a news conference.

Also Tuesday, a widely anticipated report by the IRS’s watchdog described the agency’s tax-exempt unit – where the screening of conservative groups occurred – as a bureaucratic mess, with some employees ignorant about tax laws, defiant of their supervisors and blind to the appearance of impropriety.

The report by the Treasury Inspector General for Tax Administration described in detail the use of “inappropriate criteria” to screen political advocacy groups. An IRS unit created a “lookout” list for organizations with keywords such as “tea party” or “patriot” in their names. Organizations faced months of delays in getting their applications approved.

President Barack Obama on Tuesday called the report’s findings “intolerable and inexcusable,” adding that he has directed Treasury Secretary Jack 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.”

IRS officials told the inspector general that they had used the keywords as shorthand to efficiently manage a deluge of new political advocacy groups, but that explanation was rejected by the inspector general’s office.

“Developing and using criteria that focuses on organization names and policy positions instead of the activities . . . does not promote public confidence that tax-exempt laws are being adhered to impartially,” said the report, which Inspector General J. Russell George issued.

The report did not find evidence that the actions were motivated by partisan interests. IRS officials told investigators they did not consult anyone outside the agency about the screening.

The watchdog report is likely to stoke growing outrage over the agency’s actions. No IRS employees involved in the decisions have been disciplined, and one has been promoted, said House Oversight and Government Committee Chairman Darrel Issa, R-Calif., whose panel prompted the audit.

“We still do not know why the targeting began, how extensive it was, who initiated it and who knew about it,” said Rep. Jim Jordan, R-Ohio, a member of the oversight committee.

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