I'm getting my teenager an iPod touch but I need to set up some parental controls. I know I can block the use of Facebook altogether but it would be nice if I could set it up so she could just interact with her friends online. We've had some trouble with her cyber bullying girls in her class and don't want that to happen again. I would like to be able to set up an account for her where I can control who her friends are and who she has access to. All the software I've looked at just allows you to monitor their activity and that's not good enough. Does anyone know if I can do this?
Technical solutions are not aedequate
I would like to be able to set up an account for her where I can control who her friends are and who she has access to. [...] Does anyone know if I can do this?
This is most likely impossible to achieve. Facebook (and the other social networks your daughter wants to use) themselves would need to provide you with this ability, and AFAIK, they don't. Third-party software would need to be incredibly sophisticated to provide you with what you want, which is probably the reason why you haven't found any.
I need to set up some parental controls
While such parental controls can be useful to limit the time of internet use at home, and to limit the exposure of teenagers to problematic content at home, this approach is largely useless when you consider that a), you're not the only provider of internet access - or even of internet-capable devices - for your daughter, and b) it is fairly easy to circumvent controls which try to filter what kind of content someone can see, and what he/she can publish.
Favor education over control
You need to approach this problem not with a technical solution, which is ultimately guaranteed to fail, but with education, followed by trust.
You write your daughter bullied other girls at school. This means that either she didn't realize that she was hurting someone because it was "just online", or she was fully aware but didn't care. Either way, you can't fix this with technical solutions that block access whenever she tries something like this again.
Instead, you need to address either her lack of understanding of what bullying is, or her lack of understanding what is socially acceptable behavior and what isn't.
Once she understands what is okay and what isn't, and understands that she is responsible for her behavior towards others, you'll need to define consequences of what happens when she missteps again, and then trust her to behave. If she doesn't, you'll need to follow through with the consequences you defined.
Give her feedback on her social media use
What you can do for starters is to tell her that you want to see what she's doing on her social media accounts, and that this is the condition for her getting internet access at home. Then take some time now and then to let her show you what she's posting on Facebook and other social media accounts (Instagram, Snapchat and WhatsApp have mostly replaced Facebook for teens, btw) and discuss it with her.
However, sooner or later you'll need to trust her again, because she also needs to be able to communicate with peers in privacy. Also, you'll never know whether she doesn't use two accounts for her communications, a "harmless" one she shows you, and another one she keeps private. This is why control of any kind is ultimately pointless if you can't instill in her that bullying is wrong.
Raise her to take part as an adult in a liberal society
If you did let a software solution police her behavior, then you wouldn't know whether she actually learned anything from her unacceptable behavior, and in case she didn't, she'd be free to misbehave again as soon as she was free of the software guard (e.g. at the latest when she became a legal adult - at which time it would be too late for you to intervene).
This doesn't just apply to bullying, by the way - you're dealing with a microcosm of what liberal societies expect from adults. It's very important to teach your daughter that she's not forced into action or inaction by external forces, but by her own decisions, and that therefore she is responsible for them. You can't teach that by removing her ability to act wrongly.