According to the International City/County Management Association, many municipalities are only beginning to explore artificial intelligence’s potential in complex budgeting and finance domains. In its various forms — generative AI, predictive AI and machine learning — the technology offers transformative opportunities to automate and enhance budgeting and finance processes across both state and local government operations.
Generative AI Transforms Finances in Government
Generative AI can transform government finance offices in the following areas:
Data analysis
Data analysis is one of the most time-consuming tasks in local government finance. Generative AI can streamline this process by quickly analyzing large data sets, identifying patterns and finding insights that would be difficult for humans to discern. This capability enables finance officers to make informed decisions rapidly without requiring a team of data scientists to analyze the information, enhancing the overall efficiency of government operations.
Requests for proposals
AI can automate the creation, evaluation and management of RFPs. Using natural language processing, generative AI can create draft proposals or evaluate submitted proposals, ensuring they meet particular criteria and standards. This automation reduces human error and accelerates the evaluation process, ultimately leading to more effective procurement decisions.
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Budget management
Developing and managing budget initiatives is critical for any finance office. Generative AI can assist by predicting economic trends, suggesting cost-saving measures and simulating budget scenarios. These capabilities aid in crafting balanced budgets that align with strategic priorities, enhancing fiscal responsibility and resource allocation.
Freedom of Information Act requests
Handling FOIA requests can be resource-intensive and error prone. Generative AI can streamline the process by automatically sorting, searching and retrieving relevant documents. This can reduce the burden on staff and decrease response times while ensuring compliance with legal requirements.
Writing
Generative AI can assist in drafting reports, memos and other documentation. By incorporating critical details provided by users, it can create templates or even entire drafts. This function enhances productivity by allowing staff to focus on higher-level tasks rather than time-consuming writing activities.
Productivity enhancement
Generative AI can boost overall productivity within finance offices beyond specific tasks. By automating routine work and assisting staff in more complex activities, AI frees up humans for strategic planning and decision-making, allowing for a more agile, responsive government operation.
Prompt creation
AI systems can help create prompts for decision-making processes, ensuring that all potential scenarios and outcomes are considered. This leads to more robust decision-making frameworks and helps address issues proactively.
DIVE DEEPER: Learn more about AI readiness.
Cities Can Prepare for an AI-Ready Culture
KPMG highlights several steps municipalities can take to embrace AI effectively:
Start building an AI-ready culture now
Establishing an AI-ready culture involves training staff, creating a conducive environment for AI adoption and strategically investing in technology. This cultural shift is crucial to successfully integrating AI into government operations, ensuring that employees can effectively leverage AI capabilities.
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Focus on the right challenges
Municipalities must identify which challenges are best addressed by AI. By prioritizing high-impact areas such as budgeting accuracy, resource allocation and financial reporting, local governments can maximize the benefits of AI and achieve tangible improvements in operations.
Understand what the technology can do
It is essential to have a good grasp of AI’s capabilities and limitations. This helps set realistic expectations and ensure that AI solutions are used effectively. Training sessions, workshops, and collaborations with AI experts can bridge knowledge gaps and drive informed decision-making.
Focus on use cases
Identifying and implementing specific AI use cases within government operations can highlight its potential and demonstrate tangible value. By piloting AI projects in select areas, municipalities can assess results, refine processes and expand successful initiatives more broadly.
Stay ahead of costs
While AI can offer significant cost savings, governments must stay aware of implementation and maintenance costs. Budget strategies should consider these expenses, ensuring that AI projects remain financially sustainable over the long term.
LEARN MORE: AI costs are rising; here’s what that means for government.
Experts Recommend Best Practices for AI Adoption
Coates’ Canons NC Local Government Law provides further insight into the application of AI in local government. It emphasizes understanding legal considerations, data protection and ethical implications when implementing AI technologies. These factors are critical for ensuring compliance and maintaining public trust as AI becomes more integrated into government operations.
Adopting best practices is essential for local governments to harness generative AI effectively. Key strategies include:
- Stakeholder engagement. Involving stakeholders from the beginning ensures that AI initiatives align with community needs and garner broad support. Transparency in AI processes builds trust and encourages public acceptance.
- Capability building. Investing in training programs and continuous learning opportunities helps staff to develop AI-related skills and competencies. This empowers them to navigate and utilize AI technologies to their fullest potential.
- Monitoring and evaluation. Regularly assessing AI projects and their outcomes helps identify areas for improvement and ensure that AI applications deliver expected benefits. Continuous feedback loops enable the refinement and adaptation of AI strategies.
In conclusion, generative AI holds significant promise for state and local governments, particularly in budgeting and finance. AI can drive efficiency and innovation in public administration by automating processes, enhancing decision-making and improving productivity. As state and local agencies embrace this technology, they can build a more agile, responsive and resource-effective government that better serves its constituents.
UP NEXT: State AI roadmaps must mitigate risks and build competent workforces.
