Decorations: Cover the tables with brown butcher paper. Decorate with beach balls, sand pails, bubbles, plastic sun glasses, etc... You can use them as party favors when the party is over. Use brightly colored paper goods for eating and those fun drink umbrellas with straws.
Food: Assorted sandwiches, vegetable plate, fruit salad, & blue Jell-O bowl or blue frosted cup cakes decorated with gummy fish. Be sure to have plenty of cold water bottles & popsicles on hand. Everyone can picnic on towels or blankets.
Games: Slip-n-slides and wadding pools are always a hit. These are some of my favorites too.
Water relay race: You need 1 bucket of water, 1 dry bucket, & 1 large sponge per team. Split players into two or more teams. Set the buckets of water & sponges on one side. Then put the dry bucket 10 - 15 feet away. The first team to fill their dry bucket ½ way with water without moving the buckets wins.
Wipe out : All you need is some surfing music. Everyone pretends to surf while the music is playing in the background. Then yell "Wipe Out" and everyone dramatically falls to the floor. Get up and repeat.
Water balloon volley ball: You will need LOTS of water balloons, a bucket with water in it to hold the water balloons, a beach towel for each pair of children, and a volleyball net is optional. Divide up into two groups. Pair them off and give each pair a beach towel. One side begins by placing a water balloon in the center of their towel. The object is to toss the water balloon over the net with the opposing side catching the balloon in their towel. The volley continues until one side misses and the balloon breaks. Play until you run out of water balloons.
Beach combing box: Set up a sand box with buried treasures in it. You can use coins, wrapped candy, & small toys. Be sure to let the youngest kids go first.