The AI gap: Why desire and readiness remain far apart for local governments

As artificial intelligence (AI) capabilities become increasingly more accessible and practical, local governments are at a crossroads. Based on findings from MNP’s 2025 Municipal Report, nearly 25 percent of the 282 local and regional governments that participated in our study are currently using AI, while over half of respondents are actively exploring adoption.

Local governments are optimistic about AI adoption – 61 percent of respondents noted they hope it can help reduce manual work, 59 percent said they would like to see it optimize resources, and just over half noting ideally, it would improve decision making.

However, those interested in ramping up their AI efforts are recognizing that they’re not quite ready to implement a new system yet. Though embracing AI may seem daunting, there are several avenues local government can take – it doesn’t have to be all or nothing.

From generative AI to full-scale AI programs, there is considerable opportunity for local governments to embrace the new technology without having to sacrifice functionality or time. In fact, by leveraging AI, local governments can significantly reduce administrative workloads, boost operational efficiency, and ultimately improve the experience for both employees and citizens.

In part one this two-part insight series, we will be focusing on generative AI; addressing AI opportunities and common challenges, and discussing ways to get the most out of existing infrastructure and tools.

Leveraging existing tools

Many local governments across Canada are already part of the Microsoft ecosystem. An easy way to accelerate AI initiatives in this case is through Microsoft Copilot, Microsoft’s conversational generative AI assistant.

Microsoft Copilot is a highly effective solution for municipalities seeking to modernize their operations while maintaining strong security, efficiency, and ease of use. It integrates directly with the Microsoft tools that many local government employees already use, including Outlook, Word, Excel, Teams, PowerPoint, and SharePoint. This seamless integration allows staff to access AI capabilities within their existing workflows, eliminating the need to learn new platforms or disrupt daily routines, minimizing training time and accelerating adoption.

Copilot enhances productivity by providing intelligent suggestions, automating repetitive tasks, and generating content based on your organization’s own data, honouring existing access and permissions. Employees can draft emails, analyze spreadsheets, prepare presentations, and collaborate more effectively, all within the tools they are already familiar with. This enables them to focus more on delivering services to the community and less on administrative and manual tasks.

As demonstrated through the Report findings, security and data integrity remains of the utmost importance to municipal governments across Canada. Copilot is designed with these priorities at its core. It operates on Microsoft’s Azure cloud infrastructure, ensuring that all data remains securely within the municipality’s own tenant. Unlike public AI models, Copilot does not expose information externally, nor does it train Microsoft models on your data. It uses internal documents, emails, calendars, and chats to generate context-rich, personalized responses while keeping sensitive data protected.

Administration of Copilot has been added to Microsoft Admin Centre functions, including permissions, usage, and policy enforcement using out-of-the-box Purview and Viva Insights capabilities provided with M365 Copilot licensing.

Microsoft Copilot can empower your municipalities to improve service delivery, increase internal efficiency, and uphold the highest standards of security and compliance. It is a practical and powerful tool for modern public administration.

I’m ready to get started. Now what?

Several key elements need to be in place across technology, governance, training, and culture within local government to ensure Copilot works effectively for employees.

If you already have Microsoft programming and are among those who are eager to start their local government’s AI journey but don’t know how to begin, consider these factors:

• Understand your Microsoft365 readiness
  • Ensure employees are using Microsoft 365 apps such as Word, Excel, Outlook, Teams, etc.
  • Enable Copilot licenses for relevant users
  • Confirm cloud-based storage (e.g., OneDrive, SharePoint) is used so Copilot can access organizational content
• Ensure appropriate data access and security configuration
  • Validate file permissions and access. Copilot honours existing file permissions in OneDrive and SharePoint.
  • Implement data classification and labeling to protect sensitive information
  • Ensure compliance settings, such as DLP and retention policies, are in place
• Focus on employee training and enablement
  • Provide role-specific training on how to use Copilot in daily tasks
  • Offer prompt-writing workshops to help staff get better results
  • Create internal champions or “Copilot Coaches” to support adoption
  • Foster a culture of innovation and curiosity
• Maintain strong governance and foster responsible AI use
  • Establish acceptable use policies for AI tools
  • Define boundaries for what Copilot should and shouldn’t be used for (e.g., legal advice sensitive decision, etc.)
  • Monitor usage and gather feedback to improve practices and measure value

How can local governments use generative AI?

With workloads, and populations, continuing to increase, local government staff are juggling a lot to deliver responsive and transparent services to citizens. With Copilot, teams can reduce their time spent on routine tasks, simplify complex data, and enhance collaboration. Here are some popular Copilot use cases for municipalities:

Reduce time spent on administrative tasks

Copilot streamlines everyday administrative work by helping staff draft emails, memos, and reports quickly. It can summarize lengthy documents such as meeting minutes or policy drafts, saving valuable time. Additionally, it can generate templates for permits, licenses, and public notices, ensuring consistency and efficiency across departments.

Increase effectiveness of meetings and internal collaboration

Copilot helps capture key insights from meetings by analyzing notes, transcripts, and chat logs. It identifies action items, decisions, and follow-ups, then organize them into structures summaries. It can also prepare agendas for future meetings. This ensures that all stakeholders leave meetings with a clear understanding of what was discussed and what needs to happen next.

Copilot can also draft follow-up emails, meeting recaps, and status updates, reducing the administrative burden on employees leading projects. It ensures that communication is timely, consistent, and tailored to each stakeholder group. This helps prevent miscommunication and keeps projects moving forward smoothly by providing a clear record of discussions and decisions.

Streamline policy and research support

Copilot can assist in drafting policy documents by generating initial outlines or full drafts based on existing materials such as previous policies, meeting notes, or legislative references. It can suggest structure, language, and formatting that align with municipal standards, helping staff move from concept to draft much faster. Additionally, when working with large volumes of information, such as research reports, stakeholder feedback, or legislative texts, Copilot can quickly summarize key points allowing policy analysts to focus on evaluating, refining, and finalizing content.

Understanding data and visualize trends

Municipalities often work with large spreadsheets or open data sets. Copilot can extract meaningful insights from these files by identifying anomalies, summarizing key metrics, and answering natural language questions. For example:

• Which neighbourhoods had the highest increase in service requests last quarter?
• What is the average response time for snow removal services this year?

This option enables staff to make informed decisions without needing advanced data analysis skills.

Take advantage of more advanced uses of Copilot

Copilot can power intelligent chatbots and virtual assistants that interact directly with residents through municipal websites or service portals. These AI-driven tools can guide users through completing forms such as business license applications, building permits, or service requests. They can also answer frequently asked questions, provide step-by-step instructions, and offer real-time updates on application statuses or service disruptions. This reduces call volumes to municipal offices and improves the overall resident experience by offering 24/7 support.

Copilot can also automate complex, multi-step administrative processes that typically require coordination across departments. This includes workflows such as building inspections, permit approvals, or service request handling. By integrating with existing systems and using AI to manage task sequencing, Copilot can ensure that each step is complete in the correct order, notify the appropriate personnel, and track progress in real time.

What's next?

While many local governments are actively thinking about how to make the move into AI adoption, it’s important to note there’s not a one-size-fits-all approach.

In our report, half of respondents noted that insufficient resources are holding them back from getting started. Another 43 percent said legacy technology systems are a persistent barrier and 36 percent responded that a lack of subject matter expertise is proving to be a challenge.

To learn more about what other municipalities across Canada are saying about AI adoption, download the full 2025 MNP Municipal Report.

And if you’re ready to take the next step but don’t know where to start, reach out to your local MNP advisor to learn how you can embrace AI and boost efficiency across the municipality.