Work crews yesterday were excavating drums containing various waste substances that the federal Environmental Protection Agency says are flammable and possibly carcinogenic from an old dump site adjacent to the Fort Lincoln housing development in northeast Washington.

The Fort Lincoln site, formerly the location of the federal National Training School for Boys, is the only toxic waste site in the city and one of 650 such dumps nationwide that exist on federally owned property.

All of these federally owned sites have been excluded from the list of waste sites qualifying for cleanup assistance under EPA's "Superfund" program.

The city, however, has received a $170,628 grant from the Department of Housing and Urban Development to remove from the site 500 drums containing the waste, as well as several tons of topsoil that also are contaminated.

All but about 19 of the drums have now been removed and the work is expected to be finished early in January, according to Sandra Robinson, spokeswoman for the city's Department of Housing and Community Development.

The dump, located in a wooded area along Joshua Barney Lane not far from Bladensburg Road and the modern town houses of Fort Lincoln, comprises about two acres of the 335-acre Fort Lincoln site.

William B. Johnson, director of the D.C. Department of Environmental Services, said he believes that the drums were placed there 15 to 20 years ago, but that there has been no dumping for about the last 10 years.

Johnson said earlier this week that the substances inside the drums, which include industrial solvents, oil, dyes and printing ink, posed no danger to residents of the area.

But Janet Luffy, spokeswoman for EPA's middle-Atlantic regional office, said that some of the solvents at the site are flammable and that long-term exposure to the toxic wastes at the dump could be carcinogenic.

She said it is necessary to remove about a foot of topsoil from the area because some of the drums have rusted through and their contents have leaked into the ground.

"We didn't want children playing in that soil," Luffy said.

"I have not been told" that the site is dangerous, Johnson said when informed of the EPA assessment.

"I would be concerned if anything out there is carcinogenic," Johnson added.

Luffy said the EPA believes that there is no danger of the toxic substances contaminating water supplies, since homes in the area receive water from the city's water lines and not from wells.

She said the EPA again will test the soil in January to make certain that it is no longer contaminated.

Carrie L. Thornhill, president of the Fort Lincoln Civic Association, said area residents had requested last spring that the drums be removed.

"We didn't care if the waste was dangerous of not, we wanted it removed," Thornhill said.

City officials said they were not sure what eventually will be built on the site.

Federal officials have considered placing a postal facility there--a prospect that has met with resistance from residents.