Oh the poor little thing, must be awful for your friend as well.
My gut reaction is to be honest but even not having a child myself I can't comprehend how you would explain that to such a young child.
I guess you also don't know how much the child has picked up on and what others may have said to her, be in right, wrong, rumour, exaggeration...
How about specialist grief counselling services, they may be able to recommend someone who specialises in working with children, especially when there have been difficult circumstances surrounding the death.
They may be able to help her through how best to deal with it with her daughter, preparing for it, telling her, dealing with things afterwards etc... and support her and give her any help that she may need.
They may even be able to do different types of therapy such as eother of or both of them together.
There may also be support groups or be able to put them in touch with people who have gone through similar things for understanding and further support.
It would at least teach the little girl that reaching out for help is not a bad thing and giving her the foundation of knowing there is always help out there is ever she needs it in the future as well.
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