Swimming is not mandatory for PADI. A 300m snorkel and 10mins floating on your back is enough for their Standards... however not mine.
And what, exactly, are your added standards?
I believe good snorkeling skills are more important than swimming skills. I do the snorkeling with them to instruct on body position, finning techniques etc. The float can be done on the back- this is the Standard. However you can make it more 'realistic' with interactive skills which don't look like skills on first sight. Keep people talking during the float and this require's their head to stay above water- this requires actually treading water. While treading, discuss how people drown, try 'drownproofing' and other bits of info. If people fail this, they fail the course. There is no "added standard". A subtle change but one that I have no problems with.
If you deny a certification because of your added standards that go beyond PADI standards, do you provide a full refund of the course fees?
Fees are calculated on what they did. Normally we start with a DSD and then move to the snorkel/tread. I tell people to go snorkeling before trying to dive- sometimes they do, sometimes they don't. The tread will sort the wheat from the chaff, and if they fail they pay for a DSD as we haven't opened the OW manual yet. A couple of times we have failed students here for never getting past the 'basic skills' like mask-clearing. I remember one student who took 5 days to almost get to PADI Scuba Diver. From memory she paid the same as a 'normal' SD course (without PADI fees). We spent a lot of time with her individually, her husband passed but she could not 'demonstrate mastery' of skills. This was the first time we were tipped after failing a student
This is a fairly normal progression for 'vacation instructors'. Start with DSD and progress from there. If the student fails, becomes sick, weather goes bad etc. they are billed for what they acheived and fill a PADI student record for the student to continue if they wish.