Hampshire and Isle of Wight Fire and Rescue Service has confirmed that £2.58m was carried over from the 2021/22 financial year.
On supplies and services, the fire service spent £515,000 less than expected, due to the greater use of agency staff.
A further £690,000 was saved from green book staff, with the fire service admitting that there are 'challenges in recruiting and retaining staff' particularly in the IT department.
Chief fire officer Neil Odin said the savings are good news for future years.
He said: 'There is no single reason for the difference, instead it is the result of increased underspends across a range of areas.
'Operations teams have carefully managed their budgets to deliver a substantial underspend during 2021/22.
'Given the challenges of the past year, this is a strong outturn position and reflects the continued focus on sound financial management within the service.'
A portion of the savings will be used to improve and change the operations directorate.
Further savings could also be used to cover any unforseen additional costs from the Covid-19 pandemic.
Mr Odin said: 'During financial year 2021/22 the authority continued to contribute to the response to the Covid-19 pandemic, including support to partner organisations.
'The cost of Covid-19 response was covered by government funding and the Covid-19 grant has now been fully committed.
'Should any further Covid-19 related costs emerge during the next financial year, these will become a pressure on the overall budget.'
The report was presented to members of the fire service authority board on Tuesday, July 26.
According to the chief fire officer, measures are being taken to mitigate the inflationary risks that are currently presenting problems across the country, minimising the risk to the current capital programme.
This programme includes the construction of new fire stations in Cosham and Redbridge.
Mr Odin said 'The £3.5m live fire scheme as approved by Authority in 2021 is under pressure.
'Due to pressure from Brexit, Covid and now the Ukraine war we have hit the perfect storm in the construction industry.'
The news comes as other local authorities look to make cuts to their budgets.
Hampshire County Council approved cuts of £80m in April, and expect a budget deficit of £200m by 2025/26.