AI for internal controls: Practical uses for local governments

By Bonnie Schwieger, CPA

SUMMARY

Local government finance teams are facing increasing responsibilities with limited staff and resources, making it difficult to maintain strong internal controls. This article explains how AI chatbot tools can provide practical, low-effort support to strengthen financial oversight and reduce risk.  See Frequently Asked Questions →

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Local government finance teams are being asked to take on more than ever. But with limited budgets and staff, it can be hard to keep financial oversight from falling through the cracks, particularly when it comes to internal controls. With the ability to quickly perform detailed analyses, AI chatbot tools—such as Microsoft’s Copilot, Open AI’s ChatGPT, or Anthropic’s Claude—can help.

Here are some simple ways local governments can use an AI chatbot tool to streamline key control activities.

Does your organization have an AI policy?

Before incorporating AI into any of your organization’s processes, it’s important to establish a clear AI policy. This ensures AI chatbot tools are used securely, especially when handling sensitive financial data, and sets guidelines for appropriate use within approved platforms.

Identifying check gaps

Finding a gap in your check register can mean that a check was not entered into the general ledger—and this could be a red flag for fraud or the mismanagement of funds. But scrutinizing a check register takes time, which is often in short supply for government finance teams.

Using an AI chatbot tool can help you automate this important control. You can do this by uploading your check register for a certain month or quarter into the chat and prompting it to perform an analysis. You’ll get a report that identifies not only check gaps but also anomalies that may warrant a deeper look.

Assessing credit card usage

It’s not uncommon for organizations to have credit cards with multiple users. Ensuring appropriate usage of these is important to prevent misuse or fraud. Using an AI chatbot tool to analyze credit card statements can help you identify unusual transactions or trends.

To do this, you can simply upload a credit card statement into the chat and prompt it to summarize the statement to your specifications. For instance, you may want to see total purchases per vendor or a report of weekend purchases. Analyses such as these would be useful in determining if an employee is using their credit card in ways that don’t fit their job description.

Reviewing utility billing rates

There are hundreds if not thousands of people who are billed through your organization’s utility billing register. One of the costliest risks associated with utility billing is incorrect rates. (It can be easy to mistype a utility rate.)

Using an AI chatbot tool to analyze your utility billing data, especially at the beginning of the year, is one way to mitigate this risk.

Here’s how: Simply upload a random selection of pages from your register into the chat. Then, input your rate structure and prompt the chat to analyze rates within the register. You can also use the chat to make sure there aren’t any large adjustments or outlying usage data within your register.

A simple way to streamline internal controls

The nice thing about using an AI chatbot tool to monitor and strengthen your organization’s internal controls: it’s not complicated. You can upload standard documents, such as PDFs, of your registers or statements, directly into the chat—no special formatting or system needed. (Keep in mind some chatbots will limit the number of PDFs or pages you can upload.) You get a targeted analysis that allows you to pinpoint inaccuracies or abnormalities and, if needed, take further action.

Follow best practices to protect personal data

Before uploading any document into a chatbot tool, be sure to remove employees’ personal information, such as social security numbers or addresses. One way to do this is to upload snippets of documents that don’t contain this information. For example, you could upload a credit card’s transaction history instead of the full statement.

How could you improve your organization’s internal controls?

If you think there’s room for improvement in your organization’s internal controls, reach out to your Abdo auditor. We can share best practices and provide an overview of what other local governments are doing.

To learn more about how we can help, contact us today.