MORE: Read the entire UC Audit report here
State Auditor Elaine Howle says in the report that UC administrators amassed undisclosed surplus money even as the UC raised tuition and asked the state for more funding.
Napolitano has disputed the audit's findings. "I believe that one fundamental assertion of the audit report, that the office of the office of the president has $175 million reserve or undisclosed budget is not factually accurate. Our real reserve is $38 million," said Napolitano.
She has described the money as a modest amount set aside for unexpected expenses. Lawmakers pushed back on that theory.
"I deeply believe that the trust that has existed between the legislature and the university has been eroded," said Jose Medina, a democrat from Riverside.
"Send some of that money back to the campuses, they can use it for the students or other purposes that are important," said Howle.
The audit also found salaries within The Office of the President were higher than comparable state employees, $22 million in benefits not typical in the public sector and staffing levels higher than other public universities.
RELATED: Auditors want more oversight of UC system budget
The state auditor is calling for extensive reforms in Napolitano's office, she told lawmakers she would implement all of them.
The UC Board of Regents in January voted to increase tuition and fees $336 next academic year. Some lawmakers called for a reversal of the tuition hike in the wake of the audit.
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The Associated Press contributed to this post.