Public servants see significant potential for AI but say stronger governance, AI literacy and data protections are needed, finds new research by KPMG Canada

TORONTO, Oct. 13, 2026 /CNW/ -- As governments accelerate their adoption of artificial intelligence (AI), buying Canadian is increasingly becoming a major part of the equation. More than three-quarters (76 per cent) of public servants say their organization's procurement policy stipulates acquiring AI products from Canadian firms whenever possible, according to new research from KPMG Canada.

The findings come amid heightened Canada-U.S. trade tensions and a broader push to strengthen Canada's economic sovereignty. Public servants also express significant concern about protecting the country's data and intellectual property (IP). An overwhelming 94 per cent say there is an urgent need to safeguard Canadian data and IP, while 88 per cent believe Canada should invest in sovereign data storage infrastructure. More than two-thirds (69 per cent) also believe all levels of government should collaborate to incentivize more data-centre construction in Canada.

"Public servants understand that Canada's ability to compete and innovate increasingly depends on how well we protect and govern our data," says Michael Klubal, National Industry Leader for Infrastructure, Government and Healthcare, KPMG Canada. "But data sovereignty is only one piece of the puzzle. To realize the full potential of AI, governments also need the right skills, governance frameworks and workforce capabilities in place."

At the same time, public servants are increasingly embracing AI, with two-thirds (66 per cent) saying they use the technology, up from 48 per cent the previous year. Nearly seven in 10 (69 per cent) believe it will help deliver faster, more responsive public services. Despite this optimism, governments continue to face significant challenges in scaling AI across the public sector.

The survey of 519 public servants from across Canada finds that governments are moving beyond experimentation with AI, yet significant gaps remain in governance, workforce readiness and public trust.

"The conversation has shifted dramatically over the past year," says Mr. Klubal. "Public servants increasingly recognize the value AI can bring to service delivery, operational efficiency and decision-making. What we're hearing now is a growing recognition that success depends on much more than technology. Governments need governance, workforce readiness, trusted data foundations and clear guardrails if they want to move from pilots to sustainable adoption."

The findings come as the federal government advances its new National Artificial Intelligence Strategy: AI for All, aimed at accelerating AI adoption, innovation and productivity across Canada.

Governance and trust emerge as defining challenges

The survey suggests public servants support greater investment in and adoption of AI but want stronger safeguards in place.

Nearly nine in 10 respondents (89 per cent) say Canada should develop and deploy a comprehensive AI governance policy for both the public and private sectors. The focus on governance is accompanied by significant concern about how Canadians' information will be handled as governments deploy AI.

Eighty-nine per cent of respondents are worried about how personal or sensitive citizen information will be protected when AI tools are used by governments. Additionally, 86 per cent are concerned that the public could lose trust in government if personal citizen information is stored outside Canada.

"Trust remains the currency of the public sector, with strongly governed sovereign data at its core," says Ven Adamov, Partner, Risk Services and National Leader for Data and Analytics, KPMG Canada.

"As governments explore more advanced AI capabilities, including generative and agentic AI, Canadians will expect transparency, accountability and responsible stewardship of data. Strong governance over AI models, their actions and the data they access is no longer optional; it is foundational to building trust and realizing AI's full benefits."

Skills gap threatens progress

While enthusiasm for AI continues to grow, respondents point to workforce preparedness as a major challenge.

Two-thirds (66 per cent) say they are excited about AI's potential to streamline slow or manual government processes. However, 84 per cent say AI literacy among public-sector employees is low, while 83 per cent say AI fluency is low. AI literacy is knowing how to use AI safely and effectively; AI fluency is knowing how to think, work and lead with AI.

More than eight in 10 (86 per cent) say greater investment in AI training and education is needed. Meanwhile, 72 per cent say their organization lacks sufficient specialized data and technology talent needed to help shape the ethical use of data and establish robust governance frameworks.

Respondents also see important limits to AI's role in government. An overwhelming 92 per cent believe AI should support public servants' judgment rather than replace it. Meanwhile, 73 per cent are concerned that AI could reduce the need for some public-service roles over time.

"Addressing these concerns starts with people. Public-sector leaders can support adoption by equipping employees with the right training and providing a clear vision and guidance on how the technology will be used, the benefits it can deliver, and the change management plans being put in place to support the realization of such benefits," adds Mr. Adamov.

Canadians need greater understanding of how government will use AI

The survey also points to a public awareness challenge as governments move toward broader AI adoption.

Nearly nine in 10 public servants (87 per cent) say Canadians do not truly understand how the public service will develop and use AI, highlighting the need for greater transparency and public education as scaling accelerates.

"Moving from AI experimentation to adoption at scale will require governments to address several challenges simultaneously: building workforce capabilities, establishing clear governance and accountability, protecting Canadian data and intellectual property and maintaining public trust as AI becomes more embedded in government operations and service delivery," says Mr. Klubal.

About KPMG Canada's 2026 AI in the public sector survey

KPMG Canada surveyed 519 federal, provincial and municipal public servants across Canada between July 29 and August 26, 2026, using Sago's business panel and its Methodify online research platform. Fifty-three per cent of respondents were male and 46 per cent were female. Forty-six per cent were from Ontario, 11 per cent from Quebec, 34 per cent from Western Canada and eight per cent from Eastern Canada. For comparison purposes, a probability sample of this size would have a margin of error of +/-4.3 percentage points, 19 times out of 20.

About KPMG Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.

For media inquiries:

Sonja Cloutier-Bosworth
National Communications and Media Relations
KPMG Canada
(416) 777-8175

SOURCE KPMG Management Services LP