Looks like a bad case of scale.

tj

It is azalea bark scale, Eriococcus azaleae, which is categorized between an armored scale and a soft bodied scale. If the infestation is not too severe or localized, as it appears to be in the photos, you can scrape or wipe them off with a rag dipped in rubbing alcohol. Otherwise, there are a number of chemical controls that can be utilized, but timing the application to coincide with the scale life cycle is critical.

At this time of year, manual removal - scraping or wiping - will be your best bet.

as to mushrooms or fungi growing in your mulch.. that is normal.. its ma nature breaking down the dead wood you put on top of the soil ..

its a big thing in fall.. temps.. and humidity perfect for it ...

frankly.. again.. its ma nature at work.. revel in the show ..... enjoy it..

there is nothing you need to do about it ... its not affecting your plants..

ken

Thanks for the info. Will wipe off the scale with rubbing alcohol as soon as it stops raining ...