Preheat the oven 350˚F. Grease a 9×13 inch baking pan and set aside.
Cake: In a large bowl, mix together the sugar, flour, cocoa, baking powder, baking soda and salt.
Beat in the eggs, milk, oil and vanilla until fully combined. Stir in the water. The batter will be thin.
Pour the batter into the prepared baking pan and bake in the preheated oven for 35-40 minutes, or until a toothpick inserted comes out clean. Set aside and let cool.
Icing: In a small saucepan, bring the milk, butter and sugar to a boil. Mix for 30 seconds, then remove from heat and immediately add in the chocolate chips. Mix in until melted and fully incorporated. stir in the vanilla. Pour immediately on the cooled cake.