Q: What is the awful smelling red mushroom growing in my mulch?
A: The pest you are referring to is probably Clathrus columnatus, which is commonly called Squid stinkhorn mushroom or “Dead Man’s Fingers”.
A stinkhorn grows within an enclosed structure or membrane that looks similar to an egg. When the developing fungus expands, the “egg” breaks open, revealing the young mushroom-like fungus, which at that time is often odorless. As soon as five hours after full expansion, the spore bearing surface begins to break down, and the spores become immersed in a dark-colored gel-like, foul smelling mass. Hence the name, stinkhorn!
This spore mass is attractive to flies who then visit the fungus and pick up spores as they walk over the surface of it. The spores are carried with the flies to new areas. Stinkhorns are quite common and no cause for concern; they live on dead organic matter (such as mulch). Try to remove the mushroom as soon as it appears, place it in a plastic bag and throw it away. You will need to be diligent in collecting them in order to prevent the spores from producing more mushrooms.