City Hall spent Sh8.4 billion before depositing the money in its accounts as required by law, the auditor-general has said.
Failure to deposit the money in the County Revenue Fund is among the many issues flagged by Auditor-General Edward Ouko in his 2015/16 financial year report.
Mr Ouko says many documents and explanations were missing in the financial statements for Nairobi County.
"I have not been able to obtain sufficient audit evidence to provide a basis for an audit opinion on the financial statements," Mr Ouko says in the report tabled in the Senate.
The picture that emerges from the report is of pilferage and an administration burdened by many employees.
There were similar instances in other counties which made payments outside the Integrated Financial Management System or Ifmis.
The reports will be scrutinised by the Senate Public Accounts and Investments Committee and the officers in charge when the money was spent summoned.
Nairobi County spent Sh12.47 billion, nearly half its revenue, on workers. The auditor-general expresses concern that there appeared to be no measures to stop the breach of the law on public finance management.
"The expenditure level of 48.8 per cent of the total revenue is indicative of over-establishment, which impacts negatively on the development budget," Mr Ouko says.
According to the report, 38 per cent of vehicles parked in city streets in that financial year did not pay. Had the devolved government tightened its systems, the 795,600 vehicles would have paid at least Sh238.68 million.
There were also shortfalls in the payment by owners of clamped vehicles. Owners of 10,672 cars appear to have walked away scot-free, costing the county about Sh24.5 million.
The auditor also found that while the county government had automated the systems for the parking lots it owned at the law courts, the sunken car park, Mama Ngina and Inter-Continental Hotel, the system was down most of the time.
The report found that double-parking was common in these lots but there was still a shortfall of Sh6.59 million in the county's books.
The county paid six law firms a total of Sh113.6 million without proper documentation. The payments were part of the county's overspending on lawyers by 480 per cent.
The auditor-general says there was unsupported expenditure to the tune of Sh89.65 million, use of Sh15.7 million for unplanned activities and restricted tendering that was not justified.
At Mji wa Huruma, a perimeter wall was built for Sh16.8 million while rehabilitation and automation of MacMillan Library cost Sh18.45 million.
Mombasa, Kilifi and Tana River counties failed to explain the use of millions of shillings.
Some counties were still operating bank accounts of the defunct local authorities, despite the National Treasury directing their closure.
Reports by Silas Apollo, Kennedy Kimanthi and John Ngirachu