How do you cite an internal report?

When you cite any source, you should give enough that the reader can, at least in principle, read that source for themselves. This information is especially important when you cite something as a source for further information, as it is in your example paper.

This paper presents the framework of such a complete phenomenological model outlined by Sayeedvafa (2002) that provides a description of a wide range of the observed behavior, which are both tractable from analytical as well as computational viewpoint.

For example, citations of technical reports (like your first example) should uniquely identify both the institution and the report, so that the reader knows who and how to ask for a copy. In particular, if the report is available on the web at a stable location, the citation should include a stable URL.

If a source is likely to be inaccessible to most readers (like your second example), you should also cite an accessible secondary source that describes the relevant content in detail. (If you really want to be helpful, the primary source citation should include a pointer like "Cited in [xxx].") Otherwise, you're just asking for the reader's blind trust that the source has the missing details you claim, or proves the result that you claim, or is as important as you claim, or even exists at all.

Citing a paper serves two roles. One is as a reference - a place for the reader to go and check the details. @JeffE's excellent answer deals with this case. For the completeness of the answer, let me discuss the other case.

The other role of citation is acknowledgment, that is, acknowledging that somebody else did that piece of work, rather than the authors. That should be the only reason for you to cite a paper which is not publicly available (for instance, because it is not yet ready, etc.) Some time you can find a citation that says "Author A., Private Communication", which usally means you had a bunch of emails from Mr. Author, and the result/claim/lemma is actually based on what he told you or the draft of his paper that he sent only to you, etc., and you fully acknowledge him for that contribution.

Personally, I never liked citation to Private communication, but they do exists.