What sort of penis a Sim has is specified in the game via the Body Selector functionality, not at the CAS Screen.
Make sure that setting is set to the status you want for the selected Sim. The last setting, originally called 'Can this Sim use the toilet standing?’, defines if that Sim has or has not a penis. You can change that during Sim creation or by using the 'Change Sim' interaction with any mirror object. If a Sim has a penis is specified at the CAS screen, using the Gender Settings menu.
