That is some severe spalling. Is there a lot of water/ice pooling there in winter? It could have been some poor concrete from the start. Is this slab on grade?

The house is built up and the water appears to be draining away from the house. However, there is a musty smell in the basement, but the sump pump is dry. Not sure if that is related to this issue.

Another picture

Well, the foundation has 2 cracks and water seeps through, so the basement is wet. 👎🏻

Well, I WAS going to say that my garage was built similarly, with poured cement being a bit too high so you can see it. I hide it with mulch.

But cracks in the foundation... ouch, I'm sorry to hear that :-(

This area doesn't appear the be a problem-more of an eyesore. If you do have cracks in the foundation-you should have that fixed by a company that has the equipment to jack up and repair those spots. They will get worse and start separating the brick over time. Ive learned that most things are possible with any house. The problem is some jobs are very labor intensive and it can get costly. Hope you find a quick resolve.

According to the Structural Engineer, the damage is purely cosmetic, like you stated, which is good. He also recommended having the foundation cracks fixed from the outside. Do you think the house may have to be jacked up to fix the cracks? We already received one estimate for repairs which involved excavating down about 8 feet. to reach the whole foundation wall.