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.

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.

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

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:

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.