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Does the camera indicate that the flash is turned on? In most olympus cameras I have seen there is a lightning blot at the lower left corner of the screen. Verify that it is indeed there and let me know.
Water on or in any kind of camera can spell doom to the inner workings and circuits. If the camera ever gets any kind of water inside, the chances of fixing the camera is not good. Something which could be tried when any kind of water gets into a camers's insides is this: Immediately remove the battery or batteries. The reason for this is that the circuits are live when a battery or batteries are installed. This can lead to damage and shortages which will lead to all kinds of circuit troubles.
My suggestion is to sell the camera on a site such as Ebay for parts, as is, or repair parts. The reason is the the repairs more than likely will cost more than you want to spend.
if the picture turns all white, then you might have a problem with the screen.
-or your're just aiming it at a bright object. (try covering the lens with your hand- dont actually touch it, just block out the light and if the screen goes dark then its still working)
if some sand or grit got inside your camera, then you have a serious problem, as sand is very abrasive,and could damage the internal mechnisims.
you should seek professional help on getting the inside cleaned out.