That looks to be slime mold-a group of odd organisms which are not technically fungi, but are classified in their own strange world. If I'm not mistaken, that bright yellow patch will eventually turn dark brown, tan, or reddish brown, and emit vast quantities of spores, particularly if you hit it with water. The spores will resemble smoke. And while it is indeed odd to see it colonizing your hose, these things are very common on woodchip or bark mulch, are harmless to plants and people, and are next to impossible to control anyway.

+oM

Thanks for the info Tom. I stopped by her place today to drop off some potted tomato plants and looked at the mold myself. It has already started turning orange in color and looked to be 'bleeding'. There were some dark red drops forming in the mold that looked to turn light orange as it trickled from the 'wound'. Is this another trait of the mold you are talking about?

Yep, that's it. Strange organisms-they actually "move", though few of us would have the time or patience to witness this fact! We sometimes call them dog-vomit fungus up here, albeit, they're not exactly fungi. Luckily, not of any harm to us or anything else really.

+oM

I've had the "dog vomit" show up a number of times with the mulch at work. Some years it is very prevalent. It eventually just goes away. Also get one that looks like a red morel mushroom full of holes. Luckily none of that at the house.

Craig