If water runs off without penetrating the grass, then it may be time to dethatch the lawn. Thatch is a thin layer of organic debris that forms between the leaf blades and roots of turfgrass. Get down on your knees at ground level and examine the grass for an underlying layer of thatch. It will look like a matting of old, grayish-brown grass stems that have grown together. If there's at least a 1" layer of thatch above the soil surface, the lawn needs to be dethatched.
Note: The primary causes of thatch are overwatering, overfertilizing and mowing too high. To help prevent thatch from forming, use a mulching lawn mower.
The best time to dethatch a cool-season lawn is early fall or early spring and a warm-season lawn is early summer. For small areas, use a thatching rake, which is a sharp-tined rake that rips the thatch out of the lawn, to remove thatch; leaf rakes or hard rakes may also be used but may not work as well depending on the situation. Rake it over the grass, digging deep to penetrate the thatch and pulling so as to loosen it apart.
For large lawns, run a power dethatcher over the lawn in a pattern that covers the area only once. When using a power dethatcher, flag irrigation heads and other hidden objects in the lawn to prevent damaging them. When the task is finished, the lawn will look terrible, but don't panic. It's supposed to look that way.
Note: You can rent a power dethatcher from most garden centers for about $30 to $75 for a few hours. It typically has a seven-horsepower engine and rotary tines on the bottom. Enlist the help of a couple of friends and a truck when picking up the equipment as it can be heavy and awkward. Read the operator's manual carefully prior to use.
Rake up the debris with a leaf rake and place it in the compost pile. Water the lawn. This is also a good time to overseed and fertilize the turf. It should take about three to four weeks for the lawn to recover and show some new growth.