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How can local governments implement effective cyber security and governance frameworks for AI?

October 1, 2025

How can local governments implement effective cyber security and governance frameworks for AI?

October 1, 2025

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Many local governments are eager to adopt AI technology to enhance the citizen and employee experience and increase operational efficiency. However, a third of respondents to the 2025 MNP Municipal Report state that they have no formal policies or guidelines for AI use.

A strong governance framework is crucial to mitigate cyber security risks and protect sensitive data. This article discusses the top challenges facing local governments regarding AI governance and cyber security and shares a roadmap to help protect your organization.

AUTHORS
Pamela Liu

Pamela is a Senior Consultant on MNP’s Cyber Security Team, bringing extensive experience in security and compliance. She has led numerous risk assessments, supported clients in their annual PCI audit, and have also aided various teams with facilitating tabletop exercises.

Eugene Ng

MNP’s Cyber Security Leader, Eugene oversees research and development activities and formulates long-term vision and strategies at the executive management level to help the firm better serve clients.

How can your local government protect sensitive data while implementing AI? Many local governments recognize the potential for this technology to transform both the citizen and employee experience. According to the 2025 MNP Municipal Report, 31 percent are actively evaluating how to use AI within their local government. However, many are realizing they are not quite ready to implement a new system yet.

Our third article in this series examines the growing importance of cyber security and governance as more local governments adopt AI technology. AI adoption is increasing — often before formal policies are in place to prevent unauthorized use and data exposure. Here we examine the cyber security implications of AI adoption for local governments and review several steps to help you navigate an ever-evolving digital landscape.

What is the current state of AI governance and cyber security?

Local governments recognize the potential for AI to increase citizen and employee satisfaction, enhance operational efficiency, and support informed decision-making. Many are currently using AI to speed up customer service, improve public safety, or support internal functions such as employee recruitment and scheduling.

While many local governments are eager to implement AI within their organization, 32 percent report having no formal policies or guidelines for AI use to mitigate cyber security risks and protect sensitive data. Only a third consider themselves very prepared from a privacy and cyber security standpoint although cyber security ranked as the top priority in the 2025 MNP Municipal Report.

Managing cyber security and privacy concerns related to AI use is crucial, as local governments handle sensitive citizen data. According to the 2025 MNP Municipal Report:

  • 73% of respondents identified cyber security and privacy as one of their top five technology-related challenges over the next five years.
  • 74% identified cyber security as one of the top five types of training they believe are most needed to improve the use of data and analytics in their local government.

Effective governance frameworks and strong cyber security practices are crucial to prevent unauthorized AI use and data exposure. Establishing clear policies and guidelines can help ensure the responsible use of AI and mitigate cyber security risks effectively.

What are the top risks facing local governments?

While AI has the potential to address strategic and operational needs, its implementation and use also introduces new concerns around cyber security, privacy, and data protection. These are three of the challenges facing local governments as AI adoption increases:

AI governance and policy development

Many organizations implement AI before any formal governance frameworks or policies have been developed to govern its use. A lack of governance can lead to risky or inconsistent use of AI technologies, increasing risks such as inappropriate use and the potential exposure of confidential data.

What does this mean for local governments?

Ensuring visibility into all applications and data flows within your organization is crucial. Additionally, establishing approved and unapproved AI tools, implementing application whitelisting/blacklisting, and developing access controls are foundational pillars of AI risk management.

Training, education, and awareness

Many employees of local governments, especially outside of core IT staff, are often less engaged with cyber security. This makes it necessary to implement mandatory training to ensure that all employees are aware of risks and understand their roles and responsibilities in protecting the organization’s data, especially as it relates to confidential and personal information of employees and citizens.

What does this mean for local governments?

Regular education, awareness campaigns, and phishing simulations can help your local government reinforce responsibilities and risks within your organization. Employee training should be tailored to organizational maturity and include sign-offs, quizzes, and ongoing reinforcement.

Data governance and interdepartmental collaboration

Data governance has been and continues to be a major risk area for local governments since sensitive data can be potentially exposed through AI tools. Additionally, local governments often have fragmented responsibility for records management and cyber security, which can lead to gaps and blind spots. Organizations cannot protect what they do not know. This makes it crucial for local governments to understand what data is traversing across the organization.

What does this mean for local governments?

Increase collaboration between your local government’s IT staff, records management teams, and clerks teams to ensure proper access controls and data protection. Additionally, review your policies and organizational structure to address any political or structural challenges that may hinder unified policy enforcement.

A roadmap toward enhancing cyber security and governance

AI systems can introduce new vulnerabilities, such as data exposure risks. Comprehensive governance frameworks and strong cyber security measures are vital to mitigate these risks and ensure the responsible use of AI systems.

This five-step roadmap can help you get started on enhancing your local government’s cyber security measures and governance framework:

1. Conduct a risk assessment

Perform a risk assessment that includes an analysis of your local government’s crown jewel data along with current AI tool use within your organization. Begin by identifying the specific AI tools and applications currently in use — including any unauthorized or shadow IT solutions.

This helps establish a baseline for risks and informs policy development. The next step is to use available cyber tools to map assets. However, it is important to realize there may be limitations in detecting AI-specific use.

A comprehensive risk assessment should include these four key elements:

  • Business impact analysis (BIA) — Used to identify and prioritize crown jewels by assessing which assets are essential for business continuity and decision-making.
  • Data discovery and mapping — Conduct interviews and use tools like Microsoft Purview to locate sensitive data across repositories and systems.
  • Risk-based controls alignment — Map crown jewel risks to cyber security controls (e.g., Center for Internet Security (CIS) controls). This ensures that the most critical assets are protected with the most robust measures.
  • Privacy and compliance integration — Align crown jewel assessments with privacy regulations (e.g., PIPEDA, GDPR, HIPAA). Include consent inventories and breach response protocols.

2. Set and communicate clear guidelines

This step involves creating a clear list of approved and unapproved AI tools for your local government and outlining what is considered appropriate use. Communicate these guidelines across the organization and reinforce them through multiple channels to ensure your employees understand which tools are permitted.

3. Strengthen access controls and security posture

Once you have developed and communicated clear guidelines governing AI use within your local government, implement strong access controls such as application whitelisting/blacklisting to prevent unauthorized downloads and use.

It is critical to ensure permissions are set correctly to prevent unauthorized access to sensitive or confidential information — especially when using AI tools such as Copilot.

4. Provide regular training and assessments

It is necessary to conduct regular training and assessments to maintain employee compliance and awareness. This include delivering targeted training based on organizational maturity, including sign-offs, quizzes, and regular refreshers. Incorporating phishing simulations and awareness campaigns can also help reinforce good security practices within your local government.

It is important to remember that training is not a one-time event. It must be a recurring and evaluated process to successfully mitigate risks to your organization.

5. Commit to continuous improvement

The digital landscape is constantly evolving — and so are the threats. This makes continuous improvement essential to strengthen cyber security measures and protect data privacy. Regularly reviewing and updating your policies, controls, and training can help your local government adapt to evolving threats and technologies. Additionally, staying informed about new tools for AI risk detection and management can help you keep ahead of changes as the field matures.

How to overcome resource and funding challenges

Many local governments lack resources, according to the 2025 MNP Municipal Report. Assessments can help justify funding requests to leadership and council by:

  • Highlighting vulnerabilities and risks at the executive level to unlock support for cyber security initiatives.
  • Clearly presenting vulnerabilities and needs to support requests for additional resources or funding.
  • Positioning cyber security improvements as essential for safe AI adoption and overall organizational resilience.

Take the next steps

AI offers many exciting new opportunities for local governments to enhance the experiences of both citizens and employees. However, it is important to have a plan in place to ensure strong governance and cyber security measures before you get started.

If you are ready to take the next steps 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 your local government.

Connect with us to get started

Our team of dedicated professionals can help you determine which options are best for you and how adopting these kinds of solutions could transform the way your organization works. For more information, and for extra support along the way, contact our team.