Barack Obama has pledged Internal Revenue Service employees who discriminated against Tea Party groups will be held accountable after an independent watchdog heavily criticised the tax organisation for “inappropriate” behaviour.

Obama – who on Monday said he was withholding his final judgement until he saw the report – made his statement after the report was issued on Tuesday night. “I have now had the opportunity to review the treasury department watchdog’s report on its investigation of IRS personnel who improperly targeted conservative groups applying for tax-exempt status. And the report’s findings are intolerable and inexcusable.

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“The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the IRS. The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test.”

The president has directed the 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. But regardless of how this conduct was allowed to take place, the bottom line is it was wrong”.

The 47-page report by the independent treasury inspector general released on Tuesday night confirmed suspicions by members of Congress and Tea Party groups over the last three years that conservative groups were being deliberately targeted by IRS employees.

The report found that applications by groups with names such as Tea Party, Patriots or 9/12, the date of a Tea Party march on Washington in 2009, for tax exempt status were singled out and frequently subjected to delay, with some still not processed three years after the initial request.

The report, which will form the basis of a congressional hearing on Friday, is not the end of the scandal, with Republicans calling for resignations.

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The review by the treasury inspector general for tax administration was conducted between June 2012 and February this year at the IRS headquarters in Washington and at the IRS unit involved in the delays, in Cincinnati, Ohio.

The report said: “Early in calendar year 2010 the IRS began using inappropriate criteria to identify organisations applying for tax exemption status … Although the IRS has taken some action it will need to do more so that the public has reasonable assurance that applications are processed without unreasonable delay in a fair and impartial manner in the future.”

The report blamed ineffective management that “1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued”.

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Of 296 total campaign organisation requests for tax exemption status, 108 were approved and 28 withdrawn by applicants. Although none were denied, 160 were open from 206 to 1,138 days and some are still not processed.

Of the 296 cases, 72 contained the name “tea party”, 11 contained “9/12” and 13 contained “patriot”.

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The inspector general made various recommendations including speedy completion of the remaining cases, better documentation of why certain applications are chosen for review and better training for staff ahead of an election cycle.

Before the release of the report the attorney general, Eric Holder, announced that the FBI was investigating whether the law had been broken. “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.”

guardian.co.uk © Guardian News and Media 2013