Wood chip/bark mulches and composts can be a source for several interesting fungi, states the Center for Agriculture, Food and the Environment at the University of Massachusetts at Amherst. This white fungus is widespread throughout the wood chip mulch that I use in my garden. One notable gardener has theorized that this fungus is beneficial, converting wood chips into a more nutrient-rich garden soil...similar to the soil that exists naturally in a healthy, old forest.