It is convenient, but not totally necessary for the penis to drop for cleaning. Even a big hand will fit up inside a sheath if properly lubricated with K-Y jelly or one of the generic personal lubricants available in drugstores. Most gentle horses will not object to being cleaned when approached with calm, patient, and gentle persistence. Various products used as cleaning agents are mineral oil, pHisoHex, betadine soap, and K-Y jelly. The jelly is an excellent choice, and, in my opinion, superior to the others.
Mineral oil leaves quite a residue and is hard to clean up, although it does soften the debris well.
Betadine soap and pHisoHex work well enough, but require a thorough rinsing after wards. On some horses, that-might not be too easy. Most will not mind the rinsing, but if that is a problem, the lubricating jelly can be left unrinsed. That could be a big plus if your pony spooks when you show up with the garden hose. It is possible to skip that step.