Over the past two years, parents in a compact 10-year-old subdivision called "Friendly Hills" here, 20 miles southwest of Denver, have watched in horror as 12 neighborhood children died of cancer, heart disease or meningitis.

Another five children are battling cancer now, residents say, and there are dozens of unexplained cases of heart, brain and lung disease.

The neighborhood's 5,000 residents, realizing they live in what public health experts call a "cancer cluster," are blaming the problem on toxic wastes and demanding government help.

But so far, at least, government has not helped much.

The Colorado Health Department agrees that Friendly Hills has an incidence of childhood cancer much higher than the national average. But the state agency, which says this may have come about "simply by chance," does not have the funds to carry out an environmental study.

The regional office of the Environmental Protection Agency, after rebuffing the citizens for more than a year, recently undertook a series of surveys to search for toxic pollutants. The agency has told residents not to expect the results for several months.

But according to Adrienne Anderson, a local activist working with the Friendly Hills families, the federal agency, too, has warned that it may lack the funds to do much if it turns out that the health problems stem from toxic discharges in the neighborhood.

Rebecca Parr, a friendly but frightened mother of two who has spearheaded the neighborhood drive for government aid, said yesterday she would like to see her subdivision added to the EPA's "Superfund" list of sites to be cleaned up with funds provided by those who caused the pollution.

But places like Friendly Hills, where the government has not decided that toxic waste is a problem, do not qualify for the Superfund list. The neighborhood is not even on the list of 18,000 or so suspected toxic-waste sites that the EPA already has identified nationwide.

Of those, the EPA has so far selected 786 as the "most hazardous," and it acknowledges that its limited cleanup funds will not deal with them all.

Congress this week spurned an effort to expand the Superfund program this year, despite strenuous arguments from its supporters that the current $1.6 billion program is dwarfed by the mounting size of the toxic-waste problem.

"I can't imagine that those who voted against it realize how serious a threat toxic waste poses for the health of families across this country," said Sen. Bill Bradley (D-N.J.), whose effort to attach Superfund legislation to a continuing resolution failed Tuesday night on a 59-to-38 vote.

That threat is serious indeed to the residents of Friendly Hills, whose upper-middle-class homes rest in the foothills of the Rocky Mountains in an area that was dotted with uranium and coal mines as late as the 1950s. One of the uranium mines is 10 blocks from the local playground; a convenience store called "PDQ" sits close to where the radioactive ore used to be piled.

Anderson recalls bitterly that EPA officials initially told residents that they knew of no sites in the area that could pose a hazard. With one call to the U.S. Geological Survey, the citizens secured a map showing that at least five uranium mines once operated in the immediate vicinity.

"I found it. Becky Parr found it," Anderson said. "You just go to the library and look it up."

The area is three miles from a big defense plant that makes rocket fuel and about the same distance from an abandoned munitions plant.

Moreover, a privately owned reservoir sits in the hills above the neighborhood. Overflow from the reservoir feeds several small streams and rivulets that run through Friendly Hills. On several occasions, residents have found 55-gallon steel drums that presumably floated down those streams and come to rest along the banks.

In winter of 1982-83, Rebecca Parr was struck by the fact that three children within two blocks of her house had contracted cancer. She began to talk to other neighbors and found a broad pattern of disease.

In her dining room, she compiled a house-by-house map with color coding: dark green for tumors, purple for lung disease, yellow for cancer, light green for immunological disorders.

Today the map looks like a brightly colored Mondrian painting, and the heaviest concentration of dark-green lies along the path of the streams fed by the reservoir up in the foothills.

Parr asked county, state and federal governments to survey the neighborhood, but she says all replied that they lacked the funds.

According to Anderson, local officials did agree to test the water and pronounced it safe after determining that the bacterial content was within safety guidelines. "That's just great if your problem is cholera," she said.

Recently, Parr organized a citizen's survey that is now auditing 2,000 households in Friendly Hills and adjoining Harriman Park.

But she says she is not optimistic about getting government help. "They say that they can't put us on the Superfund or anything until they find a cause."