Internal Revenue Service employees were told as early as 2010 to "Be On the Look Out" for Tea Party groups and other conservative organizations seeking tax exempt status, according to a lengthy inspector general report released Tuesday.

An investigation by the Treasury Department's inspector general for tax administration found that IRS agents used "inappropriate criteria" to flag certain conservative groups for additional scrutiny, including those with "Tea Party," "Patriot" and "9/12" in their names. The agency also was targeting those groups at least a year longer than previously thought.

The report confirms long held suspicions by conservative groups seeking a tax-exempt classification that they have been wrongly targeted by the IRS because of their political leanings.

Attorney General Eric Holder announced Tuesday that he was launching his own investigation into the IRS' activities at a time when lawmakers are demanding to know who, if anyone, in the Obama administration knew of the targeting and whether those groups were targeted to weaken them prior to the 2012 election.

The report blamed the targeting on "insufficient oversight provided by [IRS} management" at the agency's offices in Cincinnati, but Republicans say agency officials in Washington knew groups were being targeted.

"The evidence is continuing to point to they did know about it," Sen. Orrin Hatch, R-Utah, said Tuesday. "This wasn't just a bunch of insignificant staffers in Ohio. It involved a lot of people and some of them were very high-level people."

The inspector general found that the additional scrutiny the IRS was applying to conservative groups was also significantly delaying those groups from being approved for tax-exempt status. Investigators said they also found that IRS employees were tagging applications from conservative groups with the words "Be On The Look Out," or BOLO, to alert others at the agency that it required additional scrutiny.

Congressional Democrats on Tuesday blamed the IRS flap over campaign finance laws that allow tax-exempt groups to spend money for political purposes without disclosing their contributors, a change they said required additional IRS scrutiny of those groups, most of which work on behalf of Republicans.

"There are the shadowy political groups masquerading as social-welfare organizations in order to solicit anonymous donations from we don't know who -- big corporations and ultra-wealthy people," Senate Majority Leader Harry Reid, D-Nev., said. "That needs to stop."

Reid pointed to Crossroads GPS, a group founded by Karl Rove that spent tens of millions of dollars running ads on behalf of Republicans last year. But he said the IRS has in the past targeted liberal groups as well, including the NAACP and Greenpeace.

"It was interesting at that time we didn't hear a single Republican grandstand the issue then," said Reid. "Where was their outrage when groups on the other side of the political spectrum were under attack?"

Other Democrats played down the significance of the IRS controversy.

Sen. Claire McCaskill, D-Mo., blamed the IRS targeting on rouge employees, "someone who has lost their mind and has done something incredibly stupid and should be fired."

McCaskill said Congress shouldn't waste much time on the IRS matter, or the other controversies, like the administration's handling of the deadly terrorist attacks in Benghazi, Libya, or the Justice Department's monitoring of journalists phones.

"There are real problems in American we ought to be fixing," McCaskill said. "We can't get so distracted by this that we quit doing our jobs."