No idea what the sand is about, it could be lots of things, maybe the builder just needed a place to unload it so filled that in to get it off his hands. Maybe it is there for drainage? If you get alot of soggy soil there pushing the fence/rock it may be a problem? Also, have you talked to the neighbors to see if their homes are the same? And have you tried to contact the builder/landscaper? If there isn't any reason to keep the sand, dig it out a little at a time and replace it. Plants you put there may need fertilizer more often as sand is of course lacking in nutrients. I'm just thinking if does have some NEED to be there, of course you will need a plan B and can cause a huge problem if you take it out, so ask around and be certain before messing with it.
Not sure what you can grow where you are, but I'd put an assortment of evergreens on the top, and trellis w clematis. Then plant a ground cover like creeping phlox or ajuga or lamium ect.
Then I'd plant flowers along the front of the wall, and bump the mulch out.