Why does my frosting have clumps in it?

I just made frosting that consists of powdered sugar, melted chocolate, butter, vanilla extract, and milk. The recipe (from Betty Crocker) said to mix the powdered sugar and butter first, then add the vanilla and chocolate, then mix in milk to get it to the right consistency. Well, I have a tasty chocolate frosting that's a good consistency to spread on my cake; however, no matter how much I mix it, it still has clumps of powdered sugar in it. What caused this, and is there anything I can do to make my frosting look more appealing?