Further spending cuts to fire and rescue services could hit their sustainability, MPs are warning.
Authorities have done well to absorb funding reductions since 2010, but frontline services must now be protected, said the Public Accounts Committee.
Transferring responsibility for England's 46 fire and rescue authorities to the Home Office is a chance to put right the "failings" of the past, said committee chairwoman Meg Hillier.
The MPs voiced concern at the lack of an independent inspectorate, saying the Department for Communities and Local Government did not provide Parliament with enough assurances on the sustainability of fire and rescue authorities.
The committee said the Home Office should set out the Government's understanding of the impact of funding cuts by the summer.
The MPs questioned plans to expand fire services into other areas, such as medical emergencies, saying it wasn't clear how this represented value for money.
Ms Hillier said : "Our report comes at a critical time for fire and rescue authorities.
"More funding cuts are in prospect and effective oversight is vital if frontline services are to be protected. Government must properly understand the local implications of budget decisions made in Whitehall and in our view that simply hasn't been happening.
"The transfer of responsibility for fire and rescue to the Home Office is an opportunity to put right the failings of the past, and one it cannot afford to miss. We urge Government to act on our recommendations and will be expecting to see improvements to oversight by the summer."
Funding for most fire and rescue services has fallen by an average of 28% since 2010, although fire safety has improved, with fewer fatalities, the report added.
Mike Penning, minister for policing, fire, criminal justice and victims said: "The fire service has delivered significant savings over the past five years.
"During the same period, fire deaths have fallen by 22% and fire injuries have fallen by a quarter.
"There is no question the fire service will still have the resources to do their important work but there are more efficiencies to be made through smarter working, reducing the cost of back office functions and using services' buying power to get the best deals from suppliers.
"At the heart of our thinking will be public safety and how to help frontline firefighters do their important job of keeping local communities safe as effectively and efficiently as possible."
Jeremy Hilton, who chairs the Local Government Association's Fire Services Management Committee, which represents all 46 fire authorities in England, said: "As this report recognises, councillors on English fire and rescue authorities have done a tremendous job of dealing with a cut in fire budgets of 28% since 2010, while working with firefighters to continue to improve fire safety.
"The fire service needs to be funded to risk, and not just demand. Unexpected events like the recent flooding, which involved 25 fire services, shows how important it is the fire service has the capacity to respond to a range of national and local events. We support the Committee's call for government to improve its understanding of the capacity of the service to make further savings through efficiencies.
"Firefighters already work alongside other emergency services, and a range of other partners. Fire and rescue authorities will continue to explore opportunities for collaboration with partners including other emergency services."