Most often the growth of a fungus on the bark of a tree indicates at some level the death of the cells below the position of the fungus. The bark on the outer edge of the tree is composed of bark tissue generated from the cambium layer below. Causes of the decay could be several, from another fungal organism causing a canker, unintended physical damage, insects or even environmental. Cleaning the wounded area back to good tissue can be done to allow the tree to begin to callus over the wound. Once the damaged area is exposed, a 10% bleach and water mixture can be sprayed to kil any organisms on the surface. If the fungus as penetrated deeper, the surface treatment will not stop the decay.