Commonly known as wood rot, fungal decay occurs when exposed, moist timber becomes a great home for timber devouring fungus.
Fungal decay is often confused for termite damage, but there are tell tale signs that distinguish it from termite damage.
It may seem confusing, as termites also also exist in areas of high moisture, however, unlike termites, the fungus needs a constant supply of moisture which it cannot supply in itself; termites can bring up moisture from remote sources.
So when you see wood rot, you'll notice that it is either exposed to the elements, or is in an area where high moisture prevails, either through leaking plumbing or ground levels.
2. Lack of mudding.
Termites always seal off their workings with mud, so if there is a damaged area with exposed timber components, then it's unlikely to be caused by termites and is more likely fungal decay.
3. Weak, fibrous timber.
The fungus attacks the lignin, which binds the wood fibers together, once broken down the timber loses its strength completely and can be pulled apart by hand.
A simple test is to try to make a splinter with the suspect timber, if you can't then it's more than likely fungal decay.